Investors are eagerly awaiting the release of the U.S. Consumer Price Index (), as it could impact the Federal Reserve’s monetary policy and cause volatility in forex markets. Expectations for inflation are mixed, with major currency pairs like , , and on the verge of significant moves depending on the outcome. The U.S. CPI is a key indicator of inflation, and any deviation from forecasts could affect financial markets, potentially leading to a delay in Fed rate cuts or even discussions of a hike. Fed Chair Jerome Powell has stressed data dependency, making this CPI release crucial for monetary policy direction and market sentiment.

The EUR/USD pair is in a tight range as traders monitor potential divergence between the Fed and the European Central Bank. A stronger U.S. inflation report could boost the dollar, pushing EUR/USD lower, while a weak CPI could lead to a dollar decline and euro recovery. Technical indicators suggest vulnerability for EUR/USD unless there is a significant change in macro data. The USD/JPY pair is sensitive to U.S.-Japan yield spreads, with a hot CPI print potentially boosting the pair towards multi-decade highs. GBP/USD faces inflation sensitivity and political risk, with a strong CPI release likely weighing on the pair. The CPI report will not only impact individual currency pairs but also have broader implications for risk sentiment, emerging market currencies, and commodities. Traders should be prepared for increased volatility and be cautious of market reactions to the CPI release.

Read more at Investing.com: US Dollar Holds Steady Ahead of CPI Report, FX Pairs Show Limited Movement