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What Are The Expectations For The US CPI Data?

What Are The Expectations For The US CPI Data?

Today’s main question for many traders and investors is if inflation has peaked in the US. They will get the answer to this question at 12:30 GMT when the headline number is released. The critical point that traders need to keep in mind is that smart money will pay attention to headline numbers and core inflation data. Remember last time, we saw the headline number climbing to 40 year high of 9.1%, but the core inflation data fell from 6% to 5.9%.

Today traders and investors expect the headline number to fall from its peak of 9.1%, hoping that last month’s reading marked the peak in inflation. When the reading was released last month, speculators started to speculate that the Fed could increase the interest rate by 100 basis points. We also heard some chat about this idea among some members of the Fed. However, the most hawkish Fed members with voting power, Walter and Bullard, didn’t back the idea of a 100 basis interest rate hike.

The expectation for today’s headline number is 8.7%, a reasonable drop from its previous reading of 9.1%. Investors believe that the expectations are appropriate, and the reason for this is that we have seen a decent drop in oil prices which has been one of the key reasons for stroking the prices higher. Secondly, and more importantly, some of the supply chain issues have also eased off. However, the war in Ukraine is going to keep things tricky. As for the core inflation number, that is expected to rise to 6.1% from its previous reading of 5.9%, which may not get a great reception among traders and investors.

Now, if the headline number fails to impress markets and we do not see the number falling from its peak. Still, we see another higher reading that goes beyond the precious reading of 9.1%, an unlikely scenario; traders may think that the Fed will increase the interest rate by 100 basis points rather than 75 or 50 basis points. However, if the number falls from 9.1% to any lower reading, we could see speculators changing their interest rate expectations from 75 to 50 basis points. If the core inflation data shows a higher reading as we mentioned above, i.e., moving from 5.9% to 6.1%, we could see the next interest rate hike of 75 basis points, which will be the same as the last.

Gold

Gold prices saw decent upward moves yesterday on the back of the dollar index’s weakness, and traders are not favouring riskier assets ahead of today’s key event. For instance, the Nasdaq index has fallen for three consecutive days, pushing traders away from riskier assets and helping the gold prices to move higher.

If the inflation number confirmed that last month’s number marked a peak in inflation, we could see a weakness in the dollar index, which could make the gold prices even stronger. We could see the gold prices quickly crossing above the 1,800 price level on the back of such circumstances. However, if the inflation number peaks up further steam, the dollar index could surge, which could be negative for gold prices.

Stocks to Watch

Elon Musk sold another 7.92 million Tesla shares worth $6.88 billion. When he sold his shares the last time back in April, he confirmed that he was done with selling his shares, but this change of his heart is making many traders question his real motivation. There are a lot of speculations around the ongoing twitter deal and if that could be why he was forced to sell his shares. Traders are likely to keep a close on both company shares on the back of this. After market hours, we saw Tesla shares climbing slightly higher, but Twitter shares fell.

The other stock likely to grab a lot of attention among traders is Coinbase. The company reported its earnings after the market close. Coinbase reported a decline in its revenue of almost 64% in the quarter, mainly due to the crypto winter. The US exchange operator also trimmed its full-year forecast. The EPS loss was $4.98 against the forecast of $2.65. The total loss for the quarter was $1.1 billion, while the same quarter last year made the company profit of $1.59 billion.