Fed Chair Jerome Powell’s comments on the Jackson Hole Symposium resulted in the worst weekly candle in US500 since June.
CPI is Moment of Truth for the Dollar
What will happen?
United States Bureau of Labor Statistics will release monthly CPI and core CPI on February 10, 15:30 GMT+2. The Consumer Price Index measures the average change in prices consumers pay for a basket of goods and services. The CPI statistics cover a variety of individuals with different incomes, including retirees, but do not include specific populations, such as patients of mental hospitals.
How will it affect the dollar?
As you know, inflation in the US hit a record-high level with a 7% rate. As a result, the US created a plan to address rising prices, including the end of bond-buying and hiking rates. However, these measures haven't had the effect yet. Investors worldwide watch closely after the US CPI release because the greenback is the world's reserve currency. Thus, high numbers for the US mean a price boost for almost every county.
The last release on January 12 created a massive bullish movement in EUR/ USD, pushing the pair 900 points higher. This release will likely have the same impact on the USD. However, the numbers can turn out to be less than expected. In that case, USD will rise on expectations of sooner rate hikes or the larger number of hikes for 2022. As for now, the market expects five rate increases throughout 2022.
How to trade on the CPI release?
Due to the importance of CPI data, it may influence gold and USD pairs. Gold is considered a hedge against inflation, but high numbers increase the chance for rate hikes so that the metal may fall against the greenback.
- If actual numbers beat expectations – the USD will rise, and gold (XAU/USD) will fall.
- Otherwise, gold will rise.
Check the economic calendar
Instruments to trade: XAU/USD, EUR/USD, NZD/USD, USD/JPY.
Last week several important economic updates influenced the Forex market. US preliminary GDP fell less than expected (0.6% actual vs. 0.7% forecast). Below you will find the key events to trade on during the week from August 29 to September 2.
The United States will publish the Inflation Rate and Core Inflation Rate, also known as US CPI and Core CPI, on August 10 at 15:30 GMT+3.
Main news that will drive the market in the upcoming week include CB Consumer Confidence Index, Canadian GDP, and US Core PCE Price Index
The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.
Every week we expect many interesting events that can shake the market.