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.
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.
As of 9:10 am EST, the 10-Year bond rate is up ~3.50% while the dollar index remains flat. Some big news coming up in the next 24 hours for the USD, EUR and AUD. US consumer confidence is expected to fall from the last reading. We received a strange signal from the EdgeFinder that could […]
This week, we have seen a lot of market swings in sentiment along with uncertainty around economic stability. Because of this mixed mindset, investors have been shifting their interest towards gold. This article will cover why gold could continue to move higher. Medium to high impact news is coming up for all currencies such as […]
There are some major news ahead for the EUR, CAD, AUD and USD pairs this week. Wednesday will be another Fed rate decision forecasted to be another 25 bp. Here are some events set to come out tomorrow: EdgeFinder Analysis UC is still the EdgeFinder's favorite buy score along with USDZAR at +7. Retail is […]
