From CPI Upd?
The dollar fell to a two-month low against the German mark on Monday as oil prices sank from worries about global economic growth. The Dow Jones Industrial Average ended little changed, while the S&P 500 and the tech-heavy Nasdaq dipped.
The US dollar rose against the rest of the world’s major currencies on Tuesday as data showing a monthly inflation pick-up fueled concerns about further interest rate hikes by the U.S. Federal Reserve, while a surge in retail sales suggests that consumer spending is resilient.
Inflation, central banks and monetary policy are closely tied together, and CPI figures often play a key role in this relationship. They also have the potential to trigger a strong and volatile market response.
Stocks have endured numerous turbulent rides upon the CPI’s monthly reading, with the average move over the last 10 releases clocking in at 1.8% – nearly double the 0.87% movement seen during 180 non-CPI trading days during this timeframe.
That has created a number of short-term opportunities for traders looking to exploit volatility in this data series. However, it is important to note that the timing and outcome of these speculative moves will be critical for determining how markets may respond.
This week, the US economy will see a wide variety of key economic indicators released including retail sales, factory activity and job creation. These data can provide a better idea of whether or not the economy is expanding at the pace it is projected to and will help inform central bank decisions regarding interest rates in the near-term.
These data points will be released in conjunction with the Fed’s latest monetary policy meeting. Investors will be watching these events closely to gauge the Fed’s future plans for interest rate hikes and how this affects the economy.
The next CPI report will be released on February 15 and is expected to show an increase in the consumer price index. This release will be important to forex markets as the CPI is a major indicator of inflation, and this has a significant impact on the central banks’ decisions to either raise or lower interest rates.
Another important economic data set is the Purchasing Managers’ Index (PMI). This report is released every month and will show a snapshot of businesses and jobs in the US. It can also give a picture of how much companies are paying their employees.
Traders should pay close attention to the PMI as it is one of the most widely watched economic reports and can indicate whether or not the economy is growing at its projected rate. A stronger PMI figure means that companies are doing well and hiring more people.
The Federal Reserve is expected to raise interest rates for the first time this year at its next monetary policy meeting on March 15. Traders will be watching this announcement very carefully, since it could signal that further increases are in the works.