14 June 2023, EUR/USD
EURUSD trading plan:
U.S. consumer prices rose moderately in May, leading to the smallest annual increase in inflation in more than two years, though underlying price pressures remained strong, supporting views that the Federal Reserve would keep interest rates unchanged while adopting a hawkish posture. Futures tied to the Fed's policy rate fell after the data, as traders firmed up bets that the U.S. central bank will decide to forgo an 11th straight interest-rate hike and keep the benchmark rate at 5.00%-5.25%. The expected softening in US CPI has materialized, with both the core and headline monthly readings printing in line with expectations. And the sharp fall in the annual headline rate means annual price increases are now growing at their slowest pace since March 2021. The numbers are probably enough to see the Fed keep rates on hold this month, as they have suggested. But interestingly the market is still pricing in an approximate 80% chance of rates being hiked again in July, which is something of an odd position: if rates do indeed need to be tightened further, then you would expect them to be done now rather than in a month’s time.
Investment idea: buy 1.0780 and take profit 1.0840.
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