The US Consumer Price Index (CPI) for June is expected to show a notable uptick, reflecting the effects of newly imposed tariffs and adding pressure to the Federal Reserve’s monetary policy outlook. The data, set for release today at 12:30 GMT, could significantly influence the US Dollar (USD) and reshape expectations for interest rate cuts in the second half of 2025.
🔹 June CPI Forecast – Inflation on the Rise
According to consensus estimates:
- Headline CPI (YoY): Expected to rise 2.7% (vs. 2.4% in May)
- Core CPI (YoY): Forecast at 3.0% (up from 2.8%)
- Monthly CPI & Core CPI (MoM): Both expected at +0.3%
The anticipated rise reflects tariff-related price pressures as businesses begin passing on increased import costs to consumers. Analysts at TD Securities predict a 0.27% core CPI gain month-over-month, up from May’s surprising dip of 0.13%. Energy prices are also expected to contribute to the headline figure.
“We look for goods prices to gather steam in June, reflecting some tariff passthrough… headline likely increased 0.27%, aided by energy prices,” TD Securities noted.
🔸 Geopolitical Tensions and Fed Independence in Focus
President Donald Trump has added fresh complexity to the inflation picture by launching an aggressive new round of tariff threats. A 30% tariff on EU and Mexican imports is set to begin August 1, alongside blanket increases on other trade partners (15%–20%).
Meanwhile, Trump continues to exert political pressure on the Fed:
- He suggested Chair Jerome Powell should step down
- White House adviser Kevin Hassett floated the idea of firing Powell over “budget overruns”
These actions have raised concerns about the Fed’s independence, even as the central bank maintains a cautious stance on rate cuts.
🧠 Market Expectations – Fed Rate Outlook and USD Impact
Despite strong labor market data—June NFP at 147,000 (vs. 110K expected) and unemployment falling to 4.1%—markets are still pricing in over 50 basis points of rate cuts this year.
- FedWatch Tool (CME): Implied odds of a September rate cut stand at 60%, down slightly from earlier this month.
- A hot CPI print could reduce the probability of multiple cuts, providing a tailwind for the USD.
- A softer reading may increase dovish bets, weighing on the Greenback.
💱 How CPI Could Affect EUR/USD
A stronger-than-expected core CPI number could trigger a sharp rebound in the US Dollar, pressuring EUR/USD lower. Conversely, a weak inflation reading could revive Euro bullish momentum.
📉 EUR/USD Technical Outlook (via FXStreet’s Dhwani Mehta):
- Support: 1.1665 (21-day SMA), 1.1631 (June 12 high), 1.1550, 1.1474 (50-day SMA)
- Resistance: 1.1750, 1.1800, 1.1830 (multi-year high)
- RSI: Holding above 50, suggesting bullish bias remains despite recent pullback
📊 Conclusion: CPI Report Will Set the Tone for USD Direction
Today’s inflation data is a key risk event. A hotter-than-expected CPI could reinforce Fed hawkishness and strengthen the USD, particularly against the EUR. On the other hand, a weaker CPI print would validate market expectations of a dovish tilt later this year.
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