Last week was very interesting for the markets, as we saw the releases of the US Inflation and Disney’s earnings report. So let's see what we should await this week!
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.
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.
Instruments to trade: EUR/USD, USD/JPY, all other majors, and also gold (XAU/USD)
The US Bureau of Economic Analysis will publish Core Personal Consumption Expenditures (PCE) on May 27 at 15:30 GMT+3.
The United States will publish the Preliminary GDP on Thursday, May 26, at 15:30 GMT+3.
The Reserve Bank of New Zealand will publish a monetary policy report and make an update on the interest rate on May 25, at 05:00 GMT+3.