Traders Brace For Volatility Ahead Of Inflation Numbers

After last week’s low volatile trading period and subdued performance this week promises to offer more momentum in terms of high importance risk events such as the U.S. CPI report (Wednesday) and the European Central Bank decision (Thursday). Last week, the only market-moving catalyst were Friday’s NFP data and the hotter-than-expected jobs data for March sent the U.S. dollar initially higher but gains were quickly erased and thus, the greenback ended last week moderately lower.

If the March U.S. inflation report beats projections with the consequence that the inflation outlook evolves unfavorably, the Federal Reserve may have no other choice but to justify the robustness of the labor market for being patient before turning to a looser monetary policy. This possible more hawkish stance could support the U.S. dollar in short-term time frames. However, a lower-than-anticipated inflation print would lead to a softer dollar.

On Thursday when the ECB is due to decide on monetary policy, it is almost certain that there will be no action and no change in interest rates. Market participants have a June rate cut already priced in.

EUR/USD: For accelerated momentum, watch out for price breaks either above 1.0890 or below 1.0730.

GBP/USD: The sideways trend is still intact. We will wait for a sustained break above 1.28 or below 1.25.


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