Trading the US CPI on Thursday
Trading the US CPI on Thursday
The reaction to the last Non-Farm Payroll print was based on the view that the Federal Reserve would not need to pivot and a 75 bps rate hike was coming. This resulted in negative stocks, negative precious metals, and gains for the USD. This is also the blueprint of what we should expect from incoming US data. If the data means the Fed won’t need to pivot expect the reaction outlined previously. If the data means the Fed will need to pivot then expect the opposite reaction (positive stocks, positive precious metals, negative USD).
Trading US CPI
On Thursday we will have the US CPI print and these are the expectations:
Here are the likely reactions and what we can expect from different instruments on different data prints. Remember, that the likely reaction to the Fed’s need to pivot has been pretty consistent over the last few weeks.
The reaction to a miss
If the US core print comes in below minimum expectations at 6.4% and the headline comes in below the minimum of 7.9% expected then that should support stocks, weaken the USD, and lift gold and silver. That would likely be the best tradable outcome as well since it would be counter to the reaction post the Non-farm payroll.
The reaction to a beat
Another alternative possible trade would be if the US core print comes in above the market’s maximum expectations at 7.3% and the headline over 8.3%. In this instance, we would expect selling to continue in stocks, more USD strength, and further downside in precious metals. However, the best tradable outcome would be a miss on the data to the downside.
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.
20221012
