Trading today’s US CPI print

(Giles Coghlan LLB, Lth, MA – HYCM)

Today is the release of the US CPI print. The market has been laser-focused on US growth and inflation and today’s print is likely to provide a decent intraday opportunity on any significant deviations. So, let’s see what is currently expected.

Peak inflation?

The headline inflation print is expected to fall to 8.7% from the prior print of 9.1% However the core inflation print is expected to move higher to 6.1% from the prior reading of 5.9%. So, the expectations are in keeping with the hopes that the US has passed peak inflation.

What’s the deviation to look for?

There are two possible trades here.

Possible trade 1

If the headline comes in above maximum expectations at 9% and the core is above 6.2% then markets may still see the need for aggressive Fed action. 75 bps hikes mate be even more priced in for the Fed’s September meeting and the USDJPY can move higher on the release. Scalping USDJPY higher, using pivot points to manage risk and ‘take profit’ would be the possible choice.

Possible trade 2

If, on the other hand, the headline comes in below minimum expectations at 8.5% and the core is below 6% then markets will breathe a sigh of relief that the Fed is under less pressure to hike rates by 75 bps in September. This can result in a move lower in US10 year yields, USDJPY lower, XAGUSD and XAUUSD higher. Once again, daily pivot points may be used to define risk and ‘take profit’.

Soft US inflation could boost the S&P 500 and gold [Video]

(Ipek Ozkardeskaya – Swissquote Bank Ltd)

Russia halted crude flows to Hungary, Slovakia, and Czech Republic yesterday because sanctions prevented payment of a transit fee. But oil bulls are also quite this week, as US and Iran could finally reach a nuclear agreement, which would then unlock the Iranian oil and give a certain relief to the tight-supply market.

On earnings front, Coinbase missed estimates and Micron Technology was the latest US chipmaker to warn of a significant slowdown in chip demand, yesterday. While US chip stocks suffer this year, their Chinese counterparts grow fast.

Today is probably the most important day of the week in terms of economic data, as the US will reveal its latest CPI data, and investors have high expectations of seeing a softer figure in July.

A CPI figure in line with expectations, or ideally softer will certainly temper the hawkish Federal Reserve (Fed) expectations, pull US yields lower and trigger a relief rally across stock markets and gold. How far could the rally extend? 

Read Nerves ahead of US inflation