A1 Trading Company

February 13, 2023

CPI News Could Change Everything For USD

Frank Cabibi

A key inflation report will come out tomorrow at 8:30 a.m. EST for the USD. Unlike last time, expectations are that CPI will come in higher .5% suggesting a growth in inflation. This news is a big determinant in what the Fed plans to do regarding their interest rates. Here is what could happen if we see a higher and positive inflation number tomorrow.

Higher CPI = Tighter Monetary Policy

Powell has used the term "disinflation" to describe the recent slowing of the inflation number after topping out around 8% and working down to 6.5%. Keep in mind, disinflation is not the same thing as deflation. Investors saw disinflation as a light at the end of the tunnel, and an end to rising prices was a sign to start putting money back in the stock market.

However, the market will likely drop if CPI comes in higher than expected. This is because the higher rate will force the Fed to reconsider their leniency on the dollar. Should inflation rate rise, they might consider doing 50 or even 75 basis point hikes in the future.

CPI from forexfactory

The bar chart above is Consumer Price Index's performance since July 2022. Since then, we've seen a broader cool down in inflation growth.

Although it is hard to predict future price trends for the USD and SPX, we can use this data plus past instances to form a general conclusion. If CPI is higher than expected, the USD will probably get more attention from the Fed, and this will cause higher USD demand.

DXY stuck under a resistive trend line and 50 DMA on the 1D timeframe.
SPX500 reaching the top of a wedge pattern on the 1D timeframe.

A1 Edgefinder

All-In-One Fundamental Dashboard!
Simplify your fundamental analysis with our all-in-one fundamental dashboard! 
Discount code: READER

Learn more

Hotter CPI Shakes Markets

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut. EdgeFinder Analysis EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher […]

Read More
Key Inflation Data Weighs on Investor Sentiment

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come. EdgeFinder Analysis We have been […]

Read More
PMI Pushes Higher into Expansion

This morning's ISM Manufacturing PMI data came in higher than expected this month at 50.3. Here is what investors might be thinking in regards of the latest numbers, and why this could be bearish for the dollar. EdgeFinder Analysis USOil's score drops at the start of this month as the seasonality on the 10-year average […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram