A highly anticipated March inflation report from the U.S. is expected today, with analysts predicting a slowdown, partly due to declining energy prices—which has brought some relief to consumers.

According to economists' forecasts, the Consumer Price Index (CPI) is projected to rise by just 0.1% in March compared to February, marking the lowest monthly increase in eight months. While the core CPI—which excludes volatile categories such as food and energy—is expected to rise by a more solid 0.3%, both metrics are likely to show a slowdown year-over-year.

The Federal Reserve is closely watching these figures as it shapes the future path of interest rates. A more persistent core inflation reading could prompt the Fed to maintain its hawkish stance, signaling that interest rates may remain elevated in the coming months. Conversely, a notable drop in both headline and core inflation could open the door for further policy easing, even amid the threat of a trade war.

The market's reaction to the inflation report is likely to be significant. Higher-than-expected inflation figures could lead to declines in stock markets and a rise in bond yields, as investors factor in the possibility of a more aggressive monetary policy. This scenario would also strengthen the U.S. dollar. Lower-than-expected inflation figures may produce the opposite effect.

It's worth recalling that yesterday, President Donald Trump announced a 90-day pause in his tariff policy for all countries except China, leaving tariffs at 10% for the time being. He also raised tariffs on Chinese goods to 125% after Beijing implemented retaliatory measures.

Given that around 20% of apparel imports come from China, pricing pressure from Trump's February tariffs may start to show in March's data. Additionally, some consumers may have rushed to buy goods—such as vehicles—in anticipation of future tariffs, which could put upward pressure on prices.

However, many economists suggest that it may take longer for the first round of tariffs to filter through to consumers, based on what occurred during the first Trump administration. Prices for goods excluding food, energy, and transportation are expected to rise over the next six months, potentially ending the disinflation trend that helped lower inflation last year.

"Based on the effect we saw during the 2018–2019 tariff episode, we expect the February and March tariff hikes to have their greatest impact on U.S. monthly CPI changes between May and August," said analysts at UBS.

BNP Paribas shares this view. With slowing annual wage growth, forecasters expect only minor changes across many services categories in the March CPI report. "Given the sharp decline in consumer sentiment, we cannot rule out that soft inflation readings for airfares and hotels in February reflect worsening outlooks in those sectors," BNP Paribas stated in a research note.

In any case, the currency market may experience a strong spike in volatility if the data deviates significantly from economists' projections.

As for the current EUR/USD technical outlook, buyers need to break above the 1.1020 level. Only this would open the way to a test of 1.1090. From there, it may be possible to reach 1.1140, but this would be difficult without support from major market participants. The ultimate upside target is 1.1215. If the pair declines, I expect substantial buyer activity only near 1.0945. If no interest appears there, it would be prudent to wait for a retest of the 1.0890 low or consider opening long positions from 1.0845.

As for the GBP/USD technical picture, pound buyers need to reclaim the nearest resistance at 1.2870. Only this would allow for a move toward 1.2930, although breaking above that will be challenging. The final upside target is the 1.2985 zone. In case of a decline, bears will attempt to regain control at 1.2810. If successful, a break below this range would deal a significant blow to bullish positions and push GBP/USD toward the 1.2745 low, with the potential to reach 1.2695.