How to Trade Today’s US CPI Print
How to Trade Today’s US CPI Print
The main data focus for today is the US CPI print as markets will use it in order to try and time the pace of future US rate hikes. The lower US CPI goes the less likely the Fed will need to hike rates aggressively. Remember, the key driver for US policy right now is trying to cool demand to deal with high prices. If inflation shows a sharp move lower then the USD is vulnerable to a flush lower too as aggressive hike expectations can be unwound.
The markets to watch
Gold and silver have been pressured over the last few weeks due to a strong USD and rising real yields. If US inflation pulls back we could see a sharp move higher in both gold and silver. With the gold/silver ratio high then silver could outshine gold on a rapidly falling USD.
Equities
US Indices have been pulling back in expectations of aggressive Fed hikes. Lower earnings, less disposable incomes, and higher mortgage payments are all a by-product of higher US rates. However, if inflation misses then US indices should push higher in relief of easier business conditions and lower debt repayments.
Forex
In the FX space, the most straightforward yield play on US rate expectations has been the USDJPY. So, if the inflation print misses then yields should drop and that should drag the USDJPY lower.
The takeaway
So, the print to look for is a headline y/y print below 7.8% and a m/m core reading coming in below -0.2%. Remember that the y/y forecast is for 8.1% which is already below the 8.5% prior. Now, one inflation print will not change the Fed’s mind. However, it will relieve short-term pressure and these are markets to keep an eye on over the print for potential short-term opportunities.
HYCM clients can access the Seasonax product in order to analyse over 25,000 currency pairs, indices, commodities, as well as individual stocks. Please contact your account manager for a free trial. Certain products & services mentioned herein may or may not be available to all clients depending on which HYCM Capital Markets Group entity their trading account(s) adheres to.
About: HYCM is the global brand name of HYCM Capital Markets (UK) Limited, HYCM (Europe) Ltd, HYCM Capital Markets (DIFC) Ltd and HYCM Limited, all individual entities under HYCM Capital Markets Group, a global corporation operating in Asia, Europe, and the Middle East.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.
*Any opinions made in this material are personal to the author and do not reflect the opinions of HYCM. This material is considered a marketing communication and should not be construed as containing investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. HYCM does not take into account your personal investment objectives or financial situation. HYCM makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast, or other information supplied by an employee of HYCM, a third party, or otherwise. Without the approval of HYCM, reproduction or redistribution of this information isn’t permitted.
20220913
