US CPI preview: Acceleration in US inflation to bolster the US dollar?

The US dollar may see some significant movement later this week with the publication of the latest US inflation figures.

In the meantime, the pound is facing notable headwinds this morning in the wake of lacklustre UK jobs data, with GBP/EUR sliding to a one-month low and GBP/USD striking its worst levels since the start of June.

What is forecast to happen with US inflation?

Analysts forecast Wednesday’s consumer price index will report that price pressures accelerated in April.

Headline inflation is expected to accelerate from 2.3% to 2.5% and core inflation from 2.8% to 2.9%.

However, some analysts predict that the uptick in prices may be much sharper, depending on how much of US President Donald Trump’s reciprocal tariffs filtered down to consumers.

How might this influence Fed rate cut bets and the US dollar?

If US inflation prints in line with expectations, it’s likely to cement bets that the Federal Reserve will wait until at least September before cutting interest rates again and therefore bolster USD exchange rates.

If inflation surprises to the upside, we could see a sharper appreciation of the US dollar as investors defer their rate cut bets.

On the other hand, a weaker-than-expected inflation print could be seized on by Trump to renew his calls for an immediate interest rate cut, potentially triggering a depreciation of the US dollar.

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