The US Bureau of Labor Statistics (BLS) will publish the February Consumer Price Index (CPI) data on Wednesday. The report is expected to show a stabilization in inflation, still above the Federal Reserve’s (Fed) 2% target.

The monthly CPI is forecast to rise 0.3%, following the 0.2% increase recorded in January, while the annualized reading is seen holding steady at 2.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to come in at 0.2% and 2.5%, on a monthly and yearly basis respectively.

Although inflation data is critical for Fed officials when deciding on the next policy step, the market reaction could remain muted due to the fact that the February CPI prints won’t reflect the impact of rising crude Oil prices on inflation. After the United States (US) and Israel launched a joint military operation against Iran on February 28, the barrel of West Texas Intermediate (WTI) rose sharply from about $67 to above-$110 before correcting lower.

What to expect in the next CPI data report?

CPI figures for February are unlikely to diverge significantly from market expectations. In the past six releases, monthly core CPI readings were either 0.2% or 0.3%. Similarly, CPI was up either 0.2% or 0.3% on a monthly basis in this time frame, with the exception of a 0.4% increase recorded in August, 2025.

The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) reports painted a mixed picture in regard to input price pressures in the private sector. The Prices Paid Index component of the Manufacturing PMI survey jumped to 70.5 in February from 59 in January, while the Prices Paid Index of the Services PMI survey declined to 63 from 66.6.

Previewing the inflation data, “the February CPI report this week should begin to show a moderation in services inflation that will help build confidence for the FOMC”, said TD Securities analysts.

“Core CPI likely moderated in February to 0.23% m/m owing to a slower rise in services along with more modest tariff pass-through. We look for the headline to accelerate to 0.25% m/m as energy prices rebounded. Our forecast translates to 2.5% and 2.4% y/y for core and headline, respectively,” they explained.

Economic Indicator

Consumer Price Index ex Food & Energy (MoM)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM print compares the prices of goods in the reference month to the previous month.The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Read more.

How could the US Consumer Price Index report affect EUR/USD?

Markets virtually see no chance of a Fed interest rate cut in March and only price in about a 12% probability of a 25 basis-points (bps) reduction in April, according to the CME FedWatch Tool. The odds of a fourth consecutive policy hold in June, after the central bank decided to keep interest rates unchanged in January, climbed to nearly 70% in the first few days after the US-Iran war started. Disappointing labor market data, which showed a decrease of 92,000 in Nonfarm Payrolls in February, and easing crude Oil prices, however, dragged that probability back below 60%.

A significant negative surprise in the monthly core CPI print, a reading at or below 0%, could cause investors to reassess the odds of a rate cut in June and cause the US Dollar (USD) to come under selling pressure with the immediate reaction. Conversely, a reading above 0.3% in this data could boost the USD by casting doubt on a policy-easing step in June.

Still, investors could refrain from taking large positions based on this data alone, given the uncertainty surrounding the inflation outlook from March on because of the volatility in energy prices caused by the US-Iran war.

Eren Sengezer, FXStreet European Session Lead Analyst, shares a brief technical outlook for EUR/USD.

“The Relative Strength Index (RSI) indicator on the daily chart rebound from near-30 but stays below 50, suggesting that EUR/USD is yet to complete a bullish reversal. Additionally, the pair remains below the strong 1.1675-1.1700 resistance area, reinforced by the 200-day Simple Moving Average (SMA), the Fibonacci 61.8% retracement of the November-January uptrend and the 100-day SMA.”

“In case EUR/USD fails to reclaim this region, 1.1600-1.1590 (static level, Fibonacci 78.6% retracement) could be seen as the first support area before 1.1500-1.1470 (static level, beginning point of the uptrend). Looking north, technical resistance levels could be spotted at 1.1750 (Fibonacci 50% retracement) and 1.1820 (Fibonacci 38.2% retracement).”

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.