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USD Dips, Gold Picks Up on 40yr High Inflation Having Matched Estimates

USD Dips, Gold Picks Up on 40yr High Inflation Having Matched Estimates

Justin McQueen, Strategist

USD, CPI Price Analysis & News

  • US CPI at 40yr High, Matching Estimates
  • USD Drops In Response Given Expectations for Upside Surprise

US CPI Hits 40yr High Matching Expectations

DATA RECAP: The headline rate rose 0.8% on the month, taking the yearly rate to 6.8%, in which the headline rate printed in line with expectations. The core readings also matched estimates at 0.5% m/m and 4.9% y/y. Once again, the more sticky components such as shelter costs rose 0.5%, further underscoring the recent decision by Chair Powell to retire the word transitory, when discussing inflation.

US Inflation Components

USD Dips, Gold Picks Up on 40yr High Inflation Having Matched Estimates

Source: BLS

How to Trade After a News Release

MARKET REACTION: Now while the headline was a near 40yr high, given that President Biden noted that the November data will not reflect the lower energy costs, traders had geared for a slightly firmer than expected number. Therefore, meaning that an in-line print would be a disappointment for USD bulls. That being said, this is only a short term move and with the FOMC next week, I would be surprised whether there would be a fully-fledged pullback in the greenback and thus expect dips to be bought.

However, the data provides a reminder that when trading economic data, the most important factor for markets is “how does it compare to expectations”. It doesn’t matter if its extremely high, low or the same as the prior month or year, what matters is how the data deviates from expectations.

USD, US RATES & GOLD REACTION TO US CPI

USD Dips, Gold Picks Up on 40yr High Inflation Having Matched Estimates

Source: Refintiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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