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The best opportunity from Thursday’s US CPI print

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US CPI in focus

Markets have been laser focused on inflation. This makes this week’s US CPI print data hotly anticipated. Rising concerns over high inflation has been increasing expectations about more and more rate hikes. As a result, we now have Fed Fund futures pricing in five full rate hikes this year! US 10 year yields have surged on the prospect of rising interest rates. This has also resulted in a surge in the dollar.

US 10 year yields surge

The headline inflation print is now above 7% and the political worry over rising inflation is making it a very hot topic in US politics as well as monetary policy. All of this means that the market is highly likely to have a strong reaction to the CPI print on Thursday.

But what’s the best opportunity from Thursday’s print?

Well, the best opportunity would be if the CPI print shows signs of slowing. The y/y headline is expected to come in at 7.3% with a minimum expectation of 7.0%. The core is expected to rise to 5.9% with a minimum of 5.5%. So, this means that the best opportunity would come from a miss below the minimum expectations on both the headline and the core. The importance would be that this print would mean that the Fed has some pressure released. inflationary pressures dropping would take the need for the Fed to hike rates down a level or two. Should this happen this would mean that US 10 year yields would fall. the USD should fall too and that would boost the EUR. Remember the euro has gained recently after the ECB have shown their concerns about rising inflation. In summary, if the US CPI is a miss, below minimum expectations, then the best opportunity would be in EURUSD longs.

EURUSD

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