Over the past week, option skews have broadly moved for USD puts, the bank said in a note dated May 13, with Europe-based investors fully unwinding long USD positions from the past month.
At 10:20 ET (14:20 GMT), EUR/USD traded 0.2% higher at $1.0812, even after U.S. producer prices grew by a faster-than-anticipated rate of 0.5% on a monthly basis in April, in a sign of lingering inflationary pressures early in the second quarter.
FX options positioning is poised for a weak U.S. CPI print on Wednesday, the bank added, amid wider expectations for a headline monthly rise of 0.4%, and an annual increase of 3.4%.
The key ‘core’ CPI index, which excludes volatile food and energy prices, is expected to rise 0.3% on the month in April, and 3.6% annually.
“We would expect a EURUSD rally that also clears the next 50-week and 100-day SMA resistances around 1.0823-1.0828, should U.S. core CPI see a miss this week,” the bank said, adding year-to-date, core CPI YoY for the U.S. has surprised above consensus median for four consecutive months.
Even an in-line inflation print should ease some sticky inflation concerns for investors.
As a result, “we are bullish EUR/USD this week and see the pair exiting its year-to-date downtrend should US core CPI miss for the first time in 2024.”
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