The DXY CPI Reaction

On November 14, US CPI inflation data is coming out and it’s widely anticipated to come in lower than the prior reading with the headline at 3.3% and the core in line with the prior reading of 4.1% year-on-year now there is intense focus on US inflation because markets are trying to assess whether the Federal reserve has indeed finished hiking interest rates if they have finished hiking interest rates that could signal another leg higher in US equities as well as the beginning of a down trend for the heavily bought US dollar.

In the two days out of the US CPI event, the dollar index has tended to gain with a 60% winning trade bias and an average return of 0.15%. However, this year the dollar has been very heavily bought from a positioning point of view and Markets will be very sensitive to a below consensus print, which could result in some significant dollar selling. Although it should be noted that if Markets are surprised, and we do see inflation coming in higher than economists are projecting,  then more dollar upside can be expected in line with the typical event reaction.

Major Trade Risks:
The major trade risk here is if inflation is significantly lower and this could prompt heavy USD selling out of this CPI event.

Remember don’t just trade it, Seasonax it!

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