Recent events such as the publication of extremely weak US employment data for April, as well as generally ambiguous values of production indicators, completely switched all investors' attention to the values of consumer inflation that will be presented today.

Based on the forecast, the total consumer inflation is expected to rise by 3.6% in annual terms against the 2.6% in the previous period under review. In monthly terms, the inflation rate is expected to fall from 0.6% to 0.2%. As for the basic value of the consumer price index, a mixed picture is also predicted here. The April indicator should maintain the growth rate of 0.3%, as in March. However, its annual value should rise by 2.3% against 1.6%.

Why is the published consumer inflation data so important for the markets and what reaction can we expect?

It was previously mentioned that consumer inflation data currently play a very important role for investors in understanding what can be expected from the US economy and from the Fed relative to the prospects for monetary policy.

We believe that if the inflation rate decelerates, this will be an important signal that the US economy is losing the rate of recovery and subsequent growth, which will adversely affect, for example, the so-called "growth" of company shares, whose dynamics is highly dependent on the behavior of the national economy. At the same time, the market as a whole can be supported by the presence of large-scale incentive measures, which will allow it to resume the growth of stock indices after a short correction.

Regarding the US dollar prospects, we believe that both its strong fall and growth should not be expected in the near future. The negativity is still associated with the presence of Fed's and US Treasury's large-scale measures to support the economy, which clearly weakens its course. Nevertheless, it is still supported by the consolidation of the yield of the Treasury near the recently reached local highs and its demand as a protective currency, although not recognized, still adds positivity.

Forecast of the day:

The EUR/USD pair is consolidating at the level of 1.2125. If the inflation data turns out to be below expectations, it may rise to 1.2225, but if there's growth, this will put pressure on the pair and it may decline to the level of 1.2065.

The GBP/USD pair can also rise and fall. It may either decline to the level of 1.4010 in case of positive news for the US dollar or increase to the level of 1.4225 in case of negativity.