Focus of the Day: U.S. CPI Release and Market Implications Amid Shifting Rate Cut Expectations
Today’s Highlight: U.S. Consumer Price Index (CPI)
The December U.S. Consumer Price Index (CPI), to be released today, is the most anticipated event of the day.
Following last week’s strong Nonfarm Payrolls report, expectations for rate cuts this year have been scaled back to under one. Today’s CPI results could further influence this outlook.
- Market Expectations:
- MoM: +0.4% (previous: +0.3%)
- YoY: +2.9% (previous: +2.7%)
- Core MoM: +0.3% (previous: +0.3%)
- Core YoY: +3.3% (previous: +3.3%)
If the results meet or exceed expectations, rate cut hopes may diminish further, driving the USD higher. Conversely, weaker-than-expected results could trigger a corrective USD sell-off.
Other Economic Indicators
The NY Empire State Manufacturing Index, released at the same time, also warrants attention:
- Forecast: +3.0 (previous: +0.2)
Expected improvements could serve as further evidence of U.S. economic resilience.
In the London session, the UK December CPI will also be released:
- Market Expectations:
- MoM: +0.4% (previous: +0.1%)
- YoY: +2.6% (previous: +2.6%)
- Core YoY: +3.4% (previous: +3.5%)
With concerns over low growth and persistent inflation in the UK, weaker-than-expected results could lead to pound selling.
Key Events and Speeches
Several speeches and events involving central bank officials are scheduled today, with a focus on:
- Federal Reserve’s Beige Book
- Speeches by Barkin (Richmond Fed), Kashkari (Minneapolis Fed), and Williams (NY Fed)
These remarks could provide insights into future monetary policy directions.
Market Dynamics and Strategies
- USD Trends
Depending on the CPI results, USD/JPY could retest the 158 level, while EUR/USD may aim for a break below 1.02. If CPI exceeds expectations, a stronger USD rally is anticipated. - GBP Trends
If UK CPI misses forecasts, pound selling could accelerate, particularly against the USD and EUR. - GOLD (XAU/USD)
Gold has been under pressure amid USD strength, but weaker CPI results could present an opportunity for a rebound entry. - Bitcoin (BTC/USD)
As a risk asset, Bitcoin is highly sensitive to today’s CPI and may experience heightened volatility.
Summary
Today’s U.S. CPI release will be a crucial indicator shaping the path of U.S. monetary policy. If the results exceed expectations, the USD is likely to strengthen further. Conversely, a miss could usher in a correction phase. Stay vigilant and adapt to market flows effectively.
P.S. With Trump’s inauguration approaching, any comments on tariff policies should also be closely monitored.
