US CPI data due Thursday. Here are the ranges of estimates (& why they’re crucial to know)


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Later
today,
Thursday,
11
July
2024,
we
get
the
US
consumer
inflation
data.

  • Due
    at
    1230
    GMT,
    which
    is
    0830
    US
    Eastern
    time.

What
to
expect.
This
snapshot
from
the
ForexLive
economic
data
calendar,


access
it
here
.

Taking
a
look
at
the
range
of
expectations
compared
to
the
median
consensus
(the
‘expected’
in
the
screenshot
above)
for
the
key
data
points:

June
CPI
Headline
y/y
range
of
estimates
showing:

  • 3.0%
    to
    3.3%

June
CPI
Headline
m/m
range
of
estimates
showing:

  • 0.0
    to
    0.2%

June
CPI
excluding
food
and
energy
(the
core
rate
of
inflation)
y/y
range
of
estimates
showing:

  • 3.3
    to
    3.5%

June
CPI
excluding
food
and
energy
(the
core
rate
of
inflation)
m/m
range
of
estimates
showing:

  • 0.1
    to
    0.3%

***

Why
is
knowledge
of
such
ranges
important?

Data
results
that
fall
outside
of
market
low
and
high
expectations
tend
to
move
markets
more
significantly
for
several
reasons:

  • Surprise
    Factor:
    Markets
    often
    price
    in
    expectations
    based
    on
    forecasts
    and
    previous
    trends.
    When
    data
    significantly
    deviates
    from
    these
    expectations,
    it
    creates
    a
    surprise
    effect.
    This
    can
    lead
    to
    rapid
    revaluation
    of
    assets
    as
    investors
    and
    traders
    reassess
    their
    positions
    based
    on
    the
    new
    information.

  • Psychological
    Impact:
    Investors
    and
    traders
    are
    influenced
    by
    psychological
    factors.
    Extreme
    data
    points
    can
    evoke
    strong
    emotional
    reactions,
    leading
    to
    overreactions
    in
    the
    market.
    This
    can
    amplify
    market
    movements,
    especially
    in
    the
    short
    term.

  • Risk
    Reassessment:
    Unexpected
    data
    can
    lead
    to
    a
    reassessment
    of
    risk.
    If
    data
    significantly
    underperforms
    or
    outperforms
    expectations,
    it
    can
    change
    the
    perceived
    risk
    of
    certain
    investments.
    For
    instance,
    better-than-expected
    economic
    data
    may
    reduce
    the
    perceived
    risk
    of
    investing
    in
    equities,
    leading
    to
    a
    market
    rally.

  • Triggering
    of
    Automated
    Trading:
    In
    today’s
    markets,
    a
    significant
    portion
    of
    trading
    is
    done
    by
    algorithms.
    These
    automated
    systems
    often
    have
    pre-set
    conditions
    or
    thresholds
    that,
    when
    triggered
    by
    unexpected
    data,
    can
    lead
    to
    large-scale
    buying
    or
    selling.

  • Impact
    on
    Monetary
    and
    Fiscal
    Policies:
    Data
    that
    is
    significantly
    off
    from
    expectations
    can
    influence
    the
    policies
    of
    central
    banks
    and
    governments.
    For
    example,
    in
    the
    case
    of
    the
    inflation
    data
    due
    today,
    weaker
    than
    expected
    will
    fuel
    speculation
    of
    nearer
    and
    larger
    Federal
    Open
    Market
    Committee
    (FOMC)
    rate
    cuts.
    A
    stronger
    (i.e.
    higher)
    CPI
    report
    will
    diminish
    such
    expectations.

  • Liquidity
    and
    Market
    Depth:
    In
    some
    cases,
    extreme
    data
    points
    can
    affect
    market
    liquidity.
    If
    the
    data
    is
    unexpected
    enough,
    it
    might
    lead
    to
    a
    temporary
    imbalance
    in
    buyers
    and
    sellers,
    causing
    larger
    market
    moves
    until
    a
    new
    equilibrium
    is
    found.

  • Chain
    Reactions
    and
    Correlations:
    Financial
    markets
    are
    interconnected.
    A
    significant
    move
    in
    one
    market
    or
    asset
    class
    due
    to
    unexpected
    data
    can
    lead
    to
    correlated
    moves
    in
    other
    markets,
    amplifying
    the
    overall
    market
    impact.