ING projects US April CPI at 0.9% MoM, above consensus, potentially fueling USD strength amid equity and geopolitical risks.
ING strategists forecast a 0.9% month-over-month rise in US April Consumer Price Index, pushing year-over-year inflation to 4.0%. This exceeds the 0.6% MoM and 3.7% YoY consensus, though core CPI is expected to align with estimates at 0.3% MoM and 2.7% YoY.
The rebound in headline inflation is attributed to gasoline and diesel prices, while core inflation acceleration stems from medical care and recreation costs. Despite no clear second-round effects, the hotter print could bolster recent hawkish repricing in USD swap curves, with 7 basis points of Fed tightening priced in by year-end.
USD upside may hinge more on equity market reactions and US-Iran talks, which ING views as a growing medium-term support for the currency. Global risk sentiment has outweighed short-term rate differentials and oil prices for several USD crosses, including EUR/USD.