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US CPI – Forex News Trading Events
Today we will wait for any deviation in US CPI to gauge a potential entry in to the market. Read through my analysis of this event in order to prepare for the upcoming trading opportunities.
Source:
Bureau of Labour Statistics
Frequency:
Monthly
Period:
June
Total M/M Y/Y
Prior: 0.4% 0%
Expected: 0.3% 0.1%
Low: -0.1% -0.1%
High: 0.4% 0.3%
Core
Prior: 0.1% 1.7%
Expected: 0.2% 1 .8%
Low: 0% 1.6%
High: 0.3% 1.9%
Description:
CPI measures the change in the price of goods and services purchased by consumers. CPI is the most important inflation-related release due to its earliness and broad scope. This CPI release is seasonally adjusted. Consumer prices account for a majority of overall inflation and inflation is important to currency valuation because rising prices lead the central bank to raise interest rates to contain inflation.
Summary:
This is one of the biggest numerical data points of the month. The market is using all the US data to forecast the Fed’s first rate hike. The two most important factors the Fed are monitoring are employment and inflation. Apart from the March NFP, the jobs data has been excellent over the last 12 months. The weakest link has been inflation and the Fed’s hawkish intentions are based entirely on the prediction that price levels will rise back towards their target of around 2%. Until the Fed witness the commencement of this climb, rate hikes are not going to happen – they have made that clear in their language. A sustained move higher in CPI will give a green light to raising rates as early as Q3 2015, while a further drop in CPI will cause a rate hike to be postponed until such time it rises.
Expected Market Reaction:
Yellen was hawkish on Wednesday and bullish sentiment remains evident in the dollar. As such we will be looking for a better than expected number to further this dollar rally. An in-line reading will also be positive for the dollar. A miss on this data point may see a reversal of this week’s dollar gains. This data has the capacity to cause major moves in dollar pairs.
P.S. Today we also have University of Michigan Consumer Sentiment (Preliminary reading), Canadian CPI and US Building Permits. Take a look at my weekly Forex news events overview here to learn more about this upcoming data.
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