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EUR/USD edges back from above 1.0800- check out the forecast for US CPI

Generally speaking the markets are looking for a pretty benign set of US CPI data tomorrow. That is the general consensus for both core and non-core annualised rates of consumer price inflation. The non-core rate is forecast to be running at 3% in January, down from 3.4% in December. The core rate is forecast to be running at 3.8%, from 3.9%. Now, importantly the latest data we have seen in the ISM reports does not suggest that might be the case and it remains to be seen if those will tie in with the CPI numbers tomorrow. If they do, then the markets and the dollar is going to react. So, if either CPI reading is above expectations, then the US currency will quickly latch onto that and it really depends on how big a surprise we might get. The opinion here would err more on that side of the risk outlook in that data tomorrow. Of course, if CPI is at or below consensus, then an opposite, negative reaction in the dollar will unfold and US yields will drop back. That will help the Yen and Gold too. Meantime, the dollar has just bounced modestly from earlier lows that saw the EUR/USD edge to 1.0806. It is now slipping back towards 1.0775, just now at 1.0779 

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