Jump to content

The Consumer Price Index (CPI)


Recommended Posts

Posted

US CPI Preview: How Will the US Dollar React?

 

US CPI, US Dollar Analysis and News

  • Increasingly Hawkish Fed Doing Little to Support the USD
  • US CPI Projected to Hit 7% for the First Time Since 1982

What Is the Consumer Price Index, What Does CPI Measure - TheStreet

The USD continues to struggle, failing to find its feet, despite the Fed hawks coming out in force yesterday, alongside Powell reiterating much of what we have seen priced in over the past week. Among the more notable comments had come from Bostic, who is the first Fed speaker to put a number on the size of the balance sheet runoff. The Atlanta President stated that the balance sheet should decline at least $100bln/month. To put that in context, this would be triple the size of the monthly runoff seen during the 2017-2019 quantitative tightening period.

  • The 2017-2019 QT period saw the balance sheet fall $31.3bln/month on average
  • 2018 average at $30.3bln/month
  • 2019 average (stopping in Sep) at $38.6bln/month

Moving on, the main event of today will be the latest US CPI report, where expectations are for the headline to rise 0.2ppts to 7.0%, while the core figure is seen up 0.5ppts to 5.4%. That being said, with the USD failing to rise in light of markets pricing in a more aggressive tightening path, going from 3 to 3.5 hikes this year, it does seem that traders are biased to sell the USD with much of the good news already reflected in the price.

CPI Data

  • CPI Expected 7.0% (Previous 6.8%), Range 6.6%-7.2%
  • Core CPI Expected 5.4% (Previous 4.9%), Range 4.2%-5.6%

The CPI and Forex: How CPI Data Affects Currency Prices

The table below shows the multi-asset reaction to the US CPI in recent months, which shows that anything short of a sizeable upside surprise, results in USD depreciation. The fact is, the Fed has acknowledged that inflation is spiralling somewhat, therefore, with markets over 80% priced in for a March hike and near 50% priced in for a fourth hike, significant upside for the USD appears to be limited.

Figure 1. Multi-Asset Response to US CPI

US CPI Preview: How Will the US Dollar React?

Source: DailyFX, Refinitiv, Bloomberg

 

FX Option Implied Volatility Subdued Ahead of US CPI

Ahead of the CPI report, FX options are implying a rather tepid reaction to the risk event. The

The Euro breakeven straddle is at 42pips (meaning, EUR/USD is expected to move in either direction by 42pips). Of course, while FX option implied volatility is tame, a reminder that the size of the reaction will be dependent on the deviation from consensus.

US CPI Preview: How Will the US Dollar React?

Source: Refinitiv

Implied Volatility: What it is & Why Traders Should Care

 

Jan 12, 2022 |  Justin McQueen, Strategist. DailyFX

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Lately I’ve been following AIXBT by Virtuals for a bit, and I’m not gonna lie, it’s making me wonder about the direction AI is taking in the crypto space. Kinda seen a lot of hype around AI lately on X and different forums. So here’s my take, instead of just applying AI to the usual market analysis, AIXBT is talking about AI agents that could actually be co-owned and tokenized like digital assets that interact with games, social platforms, and even manage wallets. More findings in the whole co-ownership thingy, which is a great idea especially with the blockchain aspect. A lot of people are talking about how AI could help boost revenue across different platforms, but I’m still skeptical about how this will actually work in practice. These agents are supposed to be able to do things like pick up a sword in Roblox or interact on TikTok, but will they actually change the way users engage with digital spaces? Couple of top exchanges like BINGX already listed $AIXBT which is a big deal, imho as it’s gaining some real traction already.  Notwithstanding, still thinking if this is the future of digital assets, or is it just another trend that’s getting way too much hype?
    • With Clanker native token recently listed on Bitget and already trading above $68, some people have start speculating that this AI-driven token deployment platform on the Base network could increase adoption on the blockchain due to some various reason such as; 1. Ease of Token Creation: Clanker simplifies the process of token creation to the point where it's accessible to anyone with basic social media skills. Users can deploy tokens by simply tagging Clanker on the Farcaster platform, describing their desired token, thereby lowering the entry barriers for token creators and potentially attracting a broader user base to the Base ecosystem. 2. Community Engagement and Viral Potential: The integration of token deployment with social media platforms like Farcaster encourages community participation. Memes and viral content can naturally lead to increased attention and, consequently, adoption. Clanker's tokens often become memes themselves, which can drive speculative interest and trading volume, furthering the network's visibility 3. Profit Sharing Mechanism: Clanker's model includes sharing a portion of the fees with the users who request token deployments. This financial incentive could encourage more people to use Clanker for launching tokens, thus increasing activity on Base. The promise of earning from the liquidity pool fees makes it an attractive proposition for users looking to participate in the crypto space in a potentially profitable manner. 4. Innovation in Tokenomics: By introducing tokens like LUM, which were autonomously created through AI collaboration, Clanker showcases innovative tokenomics. This not only promotes the idea of AI in blockchain but also piques interest in how tokens can be generated, possibly drawing tech enthusiasts and investors curious about new token models. 5. Fostering Decentralized Social Interaction: Clanker's operation within the Farcaster ecosystem highlights how blockchain can intersect with decentralized social networks. This intersection can lead to new forms of interaction and economic models where social engagement directly correlates with token creation, potentially making Base a hub for such activities.  6. Market Activity Boost: The surge in transaction volumes due to Clanker's activity indicates its substantial impact on the network's activity. High transaction volumes often correlate with increased interest and investment in a blockchain, which could lead to greater adoption as more participants are drawn to where the action is.   Is obvious that these factors could increase adoption to base chain but what do you think?
    • I just claimed my allocation to bitget since there is $0 gass fee for claiming. I hope this project cooks 
×
×
  • Create New...
us