Stocks declined after January’s producer price index, which is another inflation gauge, increased by 0.7% in the month, higher than the expected 0.4%.
This follows reports that January’s consumer price index and retail sales were both higher than anticipated, suggesting that the Federal Reserve may need to do more to curb inflation.
In addition, initial jobless claims unexpectedly dropped in the week ending Feb. 11, according to the Labor Department’s report.
The decline in jobless claims indicates a tight labor market, while comments from Federal Reserve Presidents James Bullard and Loretta Mester advocating for an interest rate hike in March also weighed on stocks.
Investors should be aware that inflation may not return to normal levels quickly, which could result in more volatility in the market.
Stay tuned for real-time trading opportunities in our “Daily Trading Signals” Telegram channel!
After December’s inflation data was adjusted upwards, the market has been extra jittery, so next week’s CPI date release on Tuesday is going to have a very large significance on the stance of the Fed.
Portfolio Highlights
Weekly Portfolio Updates (12 February 2023)
Not much changes in allocation since last week.
Forex & Commodities Market Highlights
ERUCAD – Following up on this trade, congrats to all those who followed and shorted! The profit is currently about 200+ pips. 💰🔥💪🏻
The current price momentum looks very strong, and has a good chance of going further.
EURCHF – After the false breakout, the bears are back in control. This looks like a good shorting opportunity.
NZDCAD – Took longer than expected, but it finally hit the TP for about 300+ pips profit! 💰🔥💪🏻
USDSGD – Formed a small bull flag, which means good chance of another bullish leg.
Congrats to those who took this rebound trade! 💰🔥💪🏻
Gold (XAUUSD) – Following up on Gold, this is how it could play out. Wait for a good pullback to take a low risk short with the tight stop.
Stock & Bond Market Highlights
Wow the 6-month T-bills have hit 5% returns. This means the expected terminal rate of interest rates have gone up.
This was the smallest 12-month increase since the period ending October 2021.
Dow closes 400 points lower as hot inflation report, comments from Fed’s Bullard raise rate hike fears.
Cryptocurrency Highlights
Ethereum (ETHUSD) – How it breaks out of this most recent consolidation will most likely determine its fate for the rest of the year.
The United States is considering sanctions on Chinese firms for their involvement in Iran’s surveillance buildup.
Despite international sanctions, Chinese state-owned companies have been shipping navigation equipment and jamming technology to Russian government-owned companies.
The United States and Brazil are joining India’s efforts to increase demand for biofuels.
Elon Musk was found not liable in a trial over his tweets about taking Tesla private, and the Federal Trade Commission is preparing a potential antitrust suit against Amazon.
Disney plans to cut 7,000 jobs and $5.5 billion in costs. Commodity trader Trafigura faces a $577 million loss after uncovering nickel fraud.
Adani plans to repay a $1.1 billion loan, while the United Kingdom’s National Health Service is in crisis due to budget cuts and the impact of Covid-19.
Chinese tech giant Alibaba is working on a rival to OpenAI’s ChatGPT.
Apple is promoting its high-end iPhones and there are signs that a stronger rebound in China will boost oil prices.
Explained more about the 4 main data points:
📌 Interest rates (FOMC)
📌 Jobs data (NFP)
📌 Inflation (CPI)
📌 Company earnings
Portfolio Highlights
Weekly Portfolio Updates (05 February 2023)
Added the breakdown for stocks.
Positive numbers are net long and negative numbers are net short. I have a mix of both to provide some hedging.
Forex & Commodities Market Highlights
AUDCAD – Following up, congrats to all those who took this trade, it is now deeply in the money! 💰🔥💪🏻
CADJPY – Watch to see if any setups develop here.
CHFJPY – Watch to see if any setups develop here.
USDSGD (weekly chart) – Rebound off strong support after heading into oversold zone on the weekly chart.
Good reward/risk ratio to go long here.
Gold (XAUUSD) – Strong selldown after the recent NFP jobs report, and the short-term momentum has swung to the bearish side.
Not advisable to go long now, as there might be a second leg of selldown.
Stock & Bond Market Highlights
Apple (AAPL) – After its poor earnings last week, the fundamentals show a decline in revenue for the first time in many years.
Can consider taking a medium/long-term short position and scale in.
NASDAQ 100 (US100) – Currently in the overbought zone based on RSI, so it is not a good time to be buying now.
Will be expecting some correction or pullback next week.
Inflation Forecasts 2023
The chart above shows the TMC’s Market Regime Scrutinizer.
It measures the market-implied odds assigned to a US recession, soft landing or strong growth regime ahead.
It is derived by scrutinizing option markets in fixed income, equity, and currencies and blending the resulting market-implied probabilities in this flagship TMC indicator.
Look for stocks to lose 30% from here, says strategist David Rosenberg. And don’t even think about turning bullish until 2024.
Have you ever wondered why the price of oil seems to change every day?
Oil is an essential commodity that powers the world’s economies, and it’s a topic that affects us all.
From fueling our cars to heating our homes, oil plays a significant role in our daily lives.
But with so many different types of oil and factors that impact their prices, it can be overwhelming to understand the oil market.
In this blog post, I will help you navigate the complex world of oil products, OPEC, and key factors that affect oil prices.
Table of Contents
What are the Different Oil Products?
There are several types of oil that are traded in the global markets, including:
Brent Crude Oil: Brent Crude is a light, sweet crude oil that is extracted from the North Sea and is used as a benchmark for the pricing of two-thirds of the world’s internationally traded crude oil supplies.
West Texas Intermediate (WTI) Crude Oil: WTI is a light, sweet crude oil that is produced in the United States and is used as a benchmark for the pricing of crude oil in North America.
Dubai Crude Oil: Dubai Crude is a light, sour crude oil that is produced in the United Arab Emirates and is used as a benchmark for the pricing of crude oil in the Asian market.
Urals Crude Oil: Urals Crude is a heavy, sour crude oil that is produced in Russia and is used as a benchmark for the pricing of crude oil in Europe.
Oman Crude Oil: Oman Crude is a medium, sour crude oil that is produced in Oman and is used as a benchmark for the pricing of crude oil in the Middle East.
Tapis Crude Oil: Tapis Crude is a light, sweet crude oil that is produced in Malaysia and is used as a benchmark for the pricing of crude oil in the Asia-Pacific region.
These are some of the most widely traded types of oil in the global market, and their prices are often used as a benchmark to price other types of crude oil.
The specific characteristics of each type of oil, such as its density, sulfur content, and refining costs, will impact its price and demand.
What are the Different Financial Products for Oil?
There are several financial products that are related to the trading of oil, including:
Futures contracts: These are agreements to buy or sell a specific quantity of oil at a set price on a future date. Futures contracts are traded on exchanges such as the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE).
Options contracts: These are similar to futures contracts, but give the buyer the right, but not the obligation, to buy or sell oil at a set price on a future date.
Exchange-Traded Funds (ETFs): These are investment products that track the price of a specific commodity, such as oil, by holding a basket of related securities. ETFs provide exposure to oil without the need to own the physical commodity.
Over-the-Counter (OTC) derivatives: These are customized financial contracts that are not traded on exchanges, but are instead negotiated between two parties. OTC derivatives are used by many large oil companies and financial institutions to hedge against price movements in the oil market.
Commodity-linked bonds: These are bonds issued by oil companies or governments that are linked to the price of oil. They offer investors exposure to the oil market through debt instruments.
Oil-linked exchange-traded notes (ETNs): These are debt securities that track the price of oil, providing investors with exposure to oil price movements.
These financial products allow individuals and institutions to gain exposure to the oil market, as well as hedge against price movements in the oil market.
It’s important to understand the specific terms, conditions, and risks associated with each product before investing.
What is OPEC and What Role does it Play?
OPEC stands for the Organization of the Petroleum Exporting Countries, and it is a global organization made up of 14 oil-producing countries, including Saudi Arabia, Venezuela, Iran, and Iraq.
The organization was founded in 1960 and is headquartered in Vienna, Austria.
OPEC’s primary goal is to coordinate and unify the policies of its member countries related to the production and sale of oil.
The organization seeks to regulate the supply of oil in order to maintain stable prices and ensure a fair return for oil-producing countries.
OPEC plays a significant role in determining the price of oil, as its member countries together produce about 40% of the world’s oil.
By coordinating their oil production policies, OPEC member countries can influence the supply of oil and, in turn, its price.
For example, if OPEC member countries agree to reduce oil production, the supply of oil will decrease, leading to higher prices.
Conversely, if they agree to increase production, the supply of oil will increase, leading to lower prices.
OPEC’s decisions on oil production and supply have a major impact on the global oil market and the economies of its member countries, as well as other countries that depend on oil imports.
The organization has been the subject of criticism and controversy, as its policies can have significant impacts on the global economy and geopolitical relations.
Key Factors that Affect Oil Prices
There are several key factors that can impact the price of oil, including:
Supply and demand: The basic economic principle of supply and demand has a significant impact on the price of oil. If demand for oil is high and supply is low, the price will increase. Conversely, if demand is low and supply is high, the price will decrease.
Geopolitical events: Political instability, armed conflicts, and other geopolitical events in oil-producing countries can disrupt the supply of oil and drive up its price.
Economic growth: Economic growth is a major factor in determining the demand for oil. As economies grow, they typically consume more oil, which can drive up prices.
Government policies: Government policies, such as taxes and subsidies, can affect the price of oil by changing the supply and demand dynamics of the market.
Inventory levels: The amount of oil in storage has a significant impact on its price. If inventory levels are high, the price of oil is likely to be lower, and vice versa.
Natural disasters: Natural disasters, such as hurricanes, earthquakes, and other weather events, can disrupt oil production and transportation, leading to price spikes.
Currency exchange rates: The value of the U.S. dollar, which is the currency in which oil is traded, can also impact the price of oil. A weaker dollar tends to drive up the price of oil, while a stronger dollar has the opposite effect.
These are some of the key factors that can affect the price of oil, and it’s important to keep in mind that there are many other factors that can play a role in determining its price.
The oil market is complex and can be influenced by a variety of factors, both internal and external to the market.
Examples of How Oil Prices are Affected
Supply and demand:
The 2008 global financial crisis was a significant example of how supply and demand affects the price of oil.
The crisis led to a sharp drop in demand for oil as consumers and businesses cut back on their spending.
This decrease in demand combined with an increase in supply due to high levels of oil production, led to a drop in the price of oil.
As a result, many oil traders reduced their investments in the oil market, anticipating further price decreases.
Geopolitical events:
The 1990 Gulf War is a classic example of how geopolitical events can impact the price of oil.
The conflict disrupted oil production and transportation in the Middle East, leading to a significant increase in oil prices.
This increase in price led to speculation among traders, who started buying oil futures in anticipation of higher prices.
Economic growth:
The rapid economic growth of China in the early 2000s had a significant impact on the demand for oil.
As the Chinese economy grew, so did its consumption of oil, driving up the price of oil.
This increase in demand led to increased investment in the oil market, as traders sought to take advantage of the rising prices.
Government policies:
The imposition of sanctions on Iran in 2018 is a recent example of how government policies can affect the price of oil.
The sanctions reduced the supply of oil from Iran, leading to an increase in oil prices.
This increase in price led to speculation among traders, who started buying oil futures in anticipation of higher prices.
Inventory levels:
The COVID-19 pandemic in 2020 is a recent example of how inventory levels can impact the price of oil.
The sharp drop in demand due to lockdowns and travel restrictions led to a buildup of oil in storage, causing the price of oil to drop.
This drop in price led to selling pressure among traders, who sought to reduce their investments in the oil market.
Natural disasters:
Hurricane Harvey in 2017 is an example of how natural disasters can impact the price of oil.
The storm disrupted oil production and transportation in the Gulf of Mexico, leading to a spike in oil prices.
This increase in price led to speculation among traders, who started buying oil futures in anticipation of higher prices.
Currency exchange rates:
The depreciation of the U.S. dollar in the early 2000s is an example of how currency exchange rates can impact the price of oil.
The weaker dollar led to an increase in the price of oil for countries that use other currencies.
This increase in price led to increased investment in the oil market, as traders sought to take advantage of the rising prices.
Concluding Thoughts
In summary, the oil market is a complex and dynamic industry that is influenced by a variety of factors.
Understanding the different types of oil, the role of OPEC, and the key factors that affect oil prices is essential for anyone who wants to gain a deeper understanding of this fascinating and important market.
Now that I have covered all about the oil market, will you consider adding any oil products to your investment portfolio?
Also, how do you think the recent developments in renewable energy sources will impact the oil market in the coming years?
https://synapsetrading.com/wp-content/uploads/2023/02/Thumbnail-The-Different-Types-of-Oil-Products-What-Affects-their-Prices.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2023-02-10 01:27:012023-02-19 02:21:15The Different Types of Oil Products & What Affects their Prices?
The Federal Reserve in the US is now using “supercore inflation” to guide interest-rate policy.
This narrow measure of inflation comprises the prices of services (e.g. barbers, lawyers, plumbers) excluding housing and energy prices.
The Fed is paying close attention to services as they tend to be driven by the cost of labor, which the Fed can more easily control with interest rates, whereas the price of goods are more affected by global factors.
The focus on supercore is expected to affect the Fed’s decisions on interest rate increases.
In this blog post, we will delve into the origin, calculation, and key numbers of supercore inflation, and explain how this data is relevant to you as a trader or investor.
Table of Contents
What is Supercore Inflation and its Origin?
Supercore inflation is a concept in economics that refers to a persistent increase in the prices of goods and services that are considered necessities for a particular population.
It is often used to describe situations where the prices of essential goods, such as food, healthcare, and housing, increase faster than overall inflation.
The origin of the concept of supercore inflation is not well documented, but it is believed to have emerged in the late 20th century as a way to describe the experience of populations in developing countries who were facing rapid increases in the cost of living, particularly for essential goods and services.
The concept is used to highlight the disproportionate impact of inflation on low-income households and to highlight the need for economic policies that address these issues.
How is the Data Calculated?
The data for supercore inflation is typically calculated by measuring the change in prices of a basket of goods and services that are considered essential for a particular population.
This basket is created based on a survey of household spending patterns and may include items such as food, housing, healthcare, transportation, and education.
The change in the prices of these items is then compared to the overall rate of inflation to determine whether prices are rising faster or slower for essential goods and services.
To calculate supercore inflation, national statistical agencies typically use consumer price indices, which are measures of changes in the prices of a basket of consumer goods and services over time.
The basket of goods and services used in consumer price indices is updated periodically to ensure that it reflects the current spending patterns of households.
The calculation of supercore inflation can also be done by private research institutions, think-tanks or economists, who use the same data sources as national statistical agencies and may use slightly different methodologies to arrive at their results.
The goal of calculating supercore inflation is to provide a more nuanced understanding of the impact of inflation on different segments of the population.
What are the Key Numbers Measured?
In measuring supercore inflation, several specific numbers are typically looked at, including:
Personal Consumption Expenditures Price Index (PCE): This measures the prices of goods and services in the US economy.
The rate of change in prices of essential goods and services: The rate at which prices of the basket of essential goods and services are increasing or decreasing is an important indicator of supercore inflation.
The comparison with overall inflation: The difference between the rate of increase in the prices of essential goods and services and the overall rate of inflation is a key metric in determining supercore inflation. If the rate of increase in the prices of essential goods and services is higher than the overall rate of inflation, it is considered an instance of supercore inflation.
The impact on low-income households: The extent to which supercore inflation is affecting low-income households is another key metric. This is often determined by comparing the rate of increase in the prices of essential goods and services for low-income households with the rate of increase for higher-income households.
The duration of the increase: The length of time over which the prices of essential goods and services have been increasing faster than overall inflation is another important metric in determining supercore inflation.
By looking at these specific numbers, economists and policymakers can gain a better understanding of the impact of inflation on different segments of the population and can develop policies to address the effects of supercore inflation on low-income households.
How is this Data Relevant to Traders and Investors?
The data on supercore inflation is relevant to traders and investors because it can provide valuable insights into the current state of the economy and can help inform investment decisions.
Understanding trends in supercore inflation can help traders and investors anticipate changes in consumer behavior, interest rates, and monetary policy, which can all have a significant impact on financial markets.
For example, if supercore inflation is rising faster than overall inflation, it can signal that consumers are facing increasing financial pressures and may be more likely to reduce their spending on discretionary items.
This, in turn, can affect the demand for certain goods and services and may lead to changes in their prices.
Investors may also use data on supercore inflation to make decisions about investing in specific industries or sectors.
For example, if supercore inflation is affecting the prices of essential goods such as food, healthcare, and housing, it may be a sign that companies in these industries are poised for growth, and investors may want to consider investing in them.
Furthermore, trends in supercore inflation can also impact interest rates, which can have a significant impact on bond prices.
If supercore inflation is rising, central banks may raise interest rates in an effort to control inflation, which can have a negative impact on bond prices.
Hence, data on supercore inflation can provide traders and investors with valuable insights into the current state of the economy, and they need to be aware of these trends and take them into account when making investment decisions.
News Trading on Supercore Inflation Data
Here are some specific examples of how traders might use each of the data points from the supercore inflation report to make trading decisions:
The rate of change in prices of essential goods and services: Traders can use the rate of change in the prices of essential goods and services to assess consumer spending patterns. If the prices of essential goods and services are increasing rapidly, it may signal that consumers are under financial pressure and are reducing their spending on discretionary items, which could negatively impact certain industries or sectors.
The comparison with overall inflation: Traders can use the difference between the rate of increase in the prices of essential goods and services and the overall rate of inflation to assess the health of the economy. If the rate of increase in the prices of essential goods and services is higher than the overall rate of inflation, it may signal that the economy is facing challenges and that consumer confidence is declining. This could negatively impact financial markets and lead to a decrease in stock prices.
The impact on low-income households: Traders can use the data on the extent to which supercore inflation is affecting low-income households to anticipate changes in consumer behavior. If low-income households are facing increasing financial pressure, they may reduce their spending, which could negatively impact certain industries or sectors. Traders may also use this data to identify potential investment opportunities in companies that serve low-income households, such as food and healthcare companies.
The duration of the increase: Traders can use the length of time over which the prices of essential goods and services have been increasing faster than overall inflation to assess the sustainability of the trend. If the trend has been in place for a prolonged period of time, it may signal that the increase in the prices of essential goods and services is likely to persist, which could negatively impact financial markets and lead to a decrease in stock prices.
By understanding the trends in supercore inflation and the factors driving these trends, traders can make more informed investment decisions and maximize their returns.
Concluding Thoughts
In summary, supercore inflation is a valuable data point to keep an eye on if you are a trader or investor.
This narrow measure of inflation, which focuses on the prices of services excluding housing and energy prices, is gaining prominence as the Federal Reserve in the US uses it to guide interest-rate policy.
By tracking trends in supercore inflation, you can gain valuable insights into the current state of the economy, anticipate changes in consumer behavior, interest rates, and monetary policy, and make informed investment decisions.
With its roots tracing back to the late 19th century, supercore inflation is a well-established concept that provides a more nuanced understanding of the impact of inflation on different segments of the population.
Now that I have covered all about the importance of supercore inflation, is it something that you will add to your trading toolbox?
https://synapsetrading.com/wp-content/uploads/2023/02/Thumbnail-What-is-Supercore-Inflation.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2023-02-08 18:43:272023-03-28 11:33:48What is Supercore Inflation and How to Trade it?
Recently, one of the hottest economic indicator is the Consumer Price Index (CPI), and it has been one of major maker movers, but what exactly does it tell us?
Released once a month, it measures the average change in prices of a basket of goods and services consumed by consumers, providing insight into inflation and the cost of living.
It is widely followed by economists, investors, and policy makers and can have a significant impact on financial markets.
In this blog post, we will delve into the origin, calculation, and key numbers of the CPI report, and explain how this data is relevant to you as a trader or investor.
We’ll also explore how traders and investors use the information from the CPI to make their investment decisions.
Table of Contents
What is the CPI and its Origin?
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a basket of goods and services.
It is used to calculate the inflation rate, which is the rate at which the general level of prices for goods and services is rising and thus purchasing power is falling.
The CPI is used by governments, central banks, and economists to make informed decisions.
The origin of the Consumer Price Index can be traced back to the late 19th century, when the US Bureau of Labor Statistics (BLS) began collecting data on the prices of goods and services.
The BLS was officially tasked with calculating the CPI in 1918, and the first official US CPI was published in 1919.
Today, the CPI is used in many countries as a measure of inflation and is widely used as an indicator of changes in purchasing power and the cost of living.
How is the Data Calculated?
The Consumer Price Index (CPI) is calculated using a statistical survey that collects data on the prices of a representative basket of goods and services purchased by consumers.
The basket of goods and services is based on the expenditures of a typical consumer, and is designed to represent the purchasing patterns of the general population.
The prices of the goods and services in the basket are collected at regular intervals, usually monthly or quarterly, from a sample of retail outlets, service providers, and rental markets.
The data collected on prices is used to calculate the average change in prices for the basket of goods and services over time.
This average change is then used to calculate the inflation rate, which is the percentage change in the CPI over a specific time period.
The inflation rate provides an indication of how much the cost of living has increased, and how much the purchasing power of consumers has declined.
The calculation of the CPI involves several steps, including:
Selection of goods and services: A basket of goods and services is selected to represent the typical expenditures of consumers. The basket is updated periodically to reflect changes in consumer spending patterns.
Collection of price data: The prices of the goods and services in the basket are collected at regular intervals from a sample of retail outlets, service providers, and rental markets.
Weighting of prices: The prices are weighted according to their importance in the overall basket of goods and services. This weighting is based on data on consumer expenditures.
Calculation of average prices: The weighted prices of the goods and services in the basket are used to calculate an average price for the basket.
Calculation of the inflation rate: The average price for the basket is compared over time to calculate the inflation rate, which is the percentage change in the average price of the basket over a specific time period.
Note that the CPI is just one of many measures of inflation, and there are other methods of calculating inflation, such as the Producer Price Index (PPI) and the Gross Domestic Product Deflator (GDP Deflator).
What are the Key Numbers of the CPI Report?
The Consumer Price Index (CPI) report contains several key numbers that provide information on the changes in the prices of goods and services over time and the level of inflation in an economy.
These key numbers include:
The overall Consumer Price Index (CPI): This is the most widely used and well-known number from the CPI report, which measures the average change over time in the prices of a basket of goods and services consumed by consumers.
Core Consumer Price Index (CPI): This is the Consumer Price Index excluding the volatile food and energy prices, and provides a more accurate measure of underlying inflation trends in the economy.
Inflation rate: This is the percentage change in the Consumer Price Index over a specified time period and indicates the rate at which the cost of living is rising and the purchasing power of consumers is declining.
Food and Beverage Index: This measures the average change over time in the prices of food and beverages purchased by consumers.
Energy Index: This measures the average change over time in the prices of energy products, such as gasoline, electricity, and heating oil.
Housing Index: This measures the average change over time in the prices of housing, including rent, owners’ equivalent rent, and shelter.
Transportation Index: This measures the average change over time in the prices of transportation services and goods, such as gasoline, motor vehicle insurance, and public transportation.
Medical Care Index: This measures the average change over time in the prices of medical care services and goods, such as hospital services, physician services, and prescription drugs.
Apparel Index: This measures the average change over time in the prices of clothing and footwear.
These key numbers provide important information on the overall level of inflation, as well as the specific components of inflation, such as food, energy, housing, transportation, and medical care.
This information can be used by governments, central banks, economists, and businesses to make informed decisions about monetary and fiscal policy, as well as to analyze economic trends and conditions.
How is this Data Relevant to Traders and Investors?
The Consumer Price Index (CPI) is relevant to traders and investors because it provides important information on inflation, which can have a significant impact on financial markets.
Inflation affects the purchasing power of consumers and the value of money, and can have a direct impact on the demand for goods and services, as well as the supply of goods and services.
Inflation can also have an indirect impact on financial markets, as central banks often use monetary policy tools, such as adjusting interest rates, to control inflation.
If inflation is rising too rapidly, central banks may raise interest rates to curb inflation, which can lead to a decrease in consumer spending and economic growth, and can have a negative impact on financial markets.
Conversely, if inflation is too low, central banks may lower interest rates to encourage consumer spending and economic growth, which can have a positive impact on financial markets.
Traders and investors use the Consumer Price Index, as well as other inflation measures, to make informed investment decisions, such as determining the expected direction of interest rates, and adjusting their portfolios accordingly.
They also use inflation data to make predictions about the future direction of financial markets, such as stock markets and bond markets, and to make decisions about the timing and size of their trades.
The Consumer Price Index provides valuable information on the level of inflation in an economy, and is an important tool for traders and investors to monitor and analyze economic trends and conditions, and make informed investment decisions.
News Trading on CPI Data
Traders can use different data points from the Consumer Price Index (CPI) report to make informed trading decisions.
Some specific examples of how traders might use these data points are:
The overall Consumer Price Index (CPI) and the core Consumer Price Index (CPI) excluding food and energy prices: Traders may use the overall and core CPIs to gauge the level of inflation in an economy and to make predictions about the future direction of interest rates. If the overall CPI or core CPI is rising rapidly, it may signal that inflation is becoming a concern, and traders may expect the central bank to raise interest rates, which can have a negative impact on financial markets. On the other hand, if the overall CPI or core CPI is low or declining, traders may expect the central bank to keep interest rates low, which can have a positive impact on financial markets.
Inflation rate: Traders may use the inflation rate to assess the pace of inflation in an economy and to make predictions about future inflation trends. If the inflation rate is high, it may signal that inflation is becoming a concern, and traders may expect the central bank to raise interest rates, which can have a negative impact on financial markets. On the other hand, if the inflation rate is low or declining, traders may expect the central bank to keep interest rates low, which can have a positive impact on financial markets.
These data points from the Consumer Price Index report provide valuable information on the level of inflation in an economy and its components, and traders use this information to make informed trading decisions, such as adjusting their portfolios, predicting the future direction of interest rates, and making decisions about the timing and size of their trades.
Concluding Thoughts
In summary, the Consumer Price Index (CPI) is a critical measure of inflation that can have a significant impact on financial markets.
As a new trader or investor, understanding the origin, calculation, and key numbers of the CPI report is crucial in making informed decisions.
The data provides insights into inflation, purchasing power, and economic trends, which can help you navigate the financial market and make sound investment choices.
Now that I have covered all about the importance of the CPI report, is it something that you will add to your trading toolbox?
https://synapsetrading.com/wp-content/uploads/2023/02/Thumbnail-What-is-the-CPI-Consumer-Price-Index.png7201280Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2023-02-08 18:25:132023-02-16 13:46:19What is the CPI (Consumer Price Index) and How to Trade it?
