DXY Potential Forecast | Pre-CPI | 14th March 2023
Hi everyone, back with a pre CPI forecast.
Today's CPI release will be wild and will be the determining factor to solidify the general direction and bias on the USD.
There has been very bearish sentiments on the USD since last Friday after NFP's release.
Fundamental context
1. Employments was good, well above the forecasted or what the market has been pricing in.
2. This shows the strong labor market in the US economy.
3. However, average hourly earnings increased at a decreasing rate to 0.2% from 0.3%.
4. This shows the slowing down of the wage inflation, which is directly correlated with the inflation print and numbers, showing an important signal/sign that inflation could be worse off.
5. In addition, unemployment rate increased by 0.2% compared to previous months.
6. The average earnings and unemployment rate prints showcases the effect of the continuous rate hikes that the Fed has partaken in.
7. This directly discourages the Fed from taking on a more hawkish stance in the market, upon seeing the fruition of the restrictive policy the Fed has performed.
CPI
1. If CPI were to be worse off than forecasted, this really solidifies the bearishness of the USD as it confirms that the Fed policy has been coming to fruition and there might not be a need to hike interest rates anymore.
2. However, if CPI print continues to be resilient and strong or greater than expectations, there is a marked chance that the Fed will hike interest rates by 50bps in the upcoming FOMC meeting, in which this hawkish stance will continue to drive the market bullish for the USD.
3. All eyes will be on the CPI print tonight.
Regards,
Chern Yu
Today's CPI release will be wild and will be the determining factor to solidify the general direction and bias on the USD.
There has been very bearish sentiments on the USD since last Friday after NFP's release.
Fundamental context
1. Employments was good, well above the forecasted or what the market has been pricing in.
2. This shows the strong labor market in the US economy.
3. However, average hourly earnings increased at a decreasing rate to 0.2% from 0.3%.
4. This shows the slowing down of the wage inflation, which is directly correlated with the inflation print and numbers, showing an important signal/sign that inflation could be worse off.
5. In addition, unemployment rate increased by 0.2% compared to previous months.
6. The average earnings and unemployment rate prints showcases the effect of the continuous rate hikes that the Fed has partaken in.
7. This directly discourages the Fed from taking on a more hawkish stance in the market, upon seeing the fruition of the restrictive policy the Fed has performed.
CPI
1. If CPI were to be worse off than forecasted, this really solidifies the bearishness of the USD as it confirms that the Fed policy has been coming to fruition and there might not be a need to hike interest rates anymore.
2. However, if CPI print continues to be resilient and strong or greater than expectations, there is a marked chance that the Fed will hike interest rates by 50bps in the upcoming FOMC meeting, in which this hawkish stance will continue to drive the market bullish for the USD.
3. All eyes will be on the CPI print tonight.
Regards,
Chern Yu
CPI data release adds further complications as the slow down is only minimal.