Everyone will be glued to the screen later in anticipation of the US CPI inflation report, which is more likely to be dovish for the USD, due to the soft employment numbers recently and the market’s expectations of impending FED rate cuts. However, you can never rule out any surprises to the upside.

Following the jump in the previous inflation reading, traders adjusted their expectations regarding the projected path for policy rates higher, but the jobs numbers, later on, were soft, increasing their bets on potential rate cuts, which is where we stand right now. Today’s inflation data will provide further insights and help refine views on when the Federal Reserve might take action.

Overall, the market will try to sift deeper into the components to determine the underlying trend in services inflation, since core CPI YoY is expected to fall 2 points while headline CPI is expected to remain unchanged. This can be difficult with things like healthcare and medications, which are becoming a larger part of the spending for the ordinary citizen. In addition, traders will also search for costs in restaurants, food, and travel to get a sense of broader trends. In any case, the odds for Gold are that it will resume the uptrend after the inflation report.

US CPI Inflation Expectations

Year-on-Year CPI Figures

• Core CPI excluding food and autos:
  • Estimated: +3.7% year-on-year (y/y), compared to +3.9% prior.
  • Estimates range from 3.6% to 3.9% y/y.

Month-on-Month CPI Figures

• Headline CPI:
  • Increased by 0.4% month-on-month in February, compared to 0.3% in January.
  • This indicates an acceleration in inflationary pressures, reflecting rising prices across a broad range of goods and services.

3 and 6 Month CPI Figures

• Core CPI year-on-year rates:
  • The 3-month year-on-year core CPI rate increased to 3.9% in January.
  • The 6-month annualized rate increased to 3.5% in January.
  • These figures highlight the sustained upward trend in core inflationary pressures over both shorter and longer periods.

Federal Reserve Chairman Jerome Powell emphasized the importance of ensuring that inflation moves sustainably towards the target and expressed caution about lowering the policy rate until policymakers have greater confidence in the inflation outlook. He stressed that the Fed is focused on the sustainability of inflation trends rather than seeking “better” inflation readings, highlighting the importance of consistency in inflationary pressures.