Key Forex Event: US Inflation Rate

Key Forex Event: US Inflation Rate

What will happen?

The US Inflation Rate (CPI) will be announced on Wednesday, October 13, at 15:30 MT (GMT+3). The inflation rate measures the month-over-month change in the price of goods and services. Traders eagerly await this event as it will impact the USD and thus the vast majority of currency pairs in the Forex market.

Why is it important?

The Federal Reserve makes policy decisions based on the Inflation Rate data. Thus, not only the actual inflation data but even traders’ expectations for the CPI release increase volatility in the Forex market. Last time, inflation was 0.3%, which was worse than expected. As a result, USD/JPY dropped sharply.

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How to trade on US inflation?

It depends on whether the actual Inflation Rate exceeds the market forecast or not. The forecast will appear a few days before the release in the economic calendar. The better-than-expected inflation rate would force the Fed to raise rates. As a result, the USD will surge. Here’s the rule below, but remember that every rule has exceptions sometimes!

  • If the US inflation rate is greater than the forecasts, the USD will rise.
  • Otherwise – drop.

Check the economic calendar

Instruments to trade: EUR/USD, USD/JPY, all other majors, and also gold (XAU/USD)

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