What are the main events for today?

Welcome to the US CPI Day! Inflation is back at the top of market’s focus after the Fed’s 50 bps cut in September, the acceleration in the US data and Trump’s victory.

If we look at the markets, there’s been already some pre-positioning/hedging into a potentially higher than expected CPI print, so there’s some risk of a “sell the fact” reaction. Of course, a bigger than expected upside surprise would be much more straightforward.

The market is currently pricing a 63% chance of a 25 bps cut in December and basically two more 25 bps rate cuts in 2025 which is already much less than the four projected by the Fed in September.

13:30 GMT/08:30 ET – US October CPI

The US CPI Y/Y is
expected at 2.6% vs. 2.4% prior, while the M/M measure is seen at 0.2% vs. 0.2%
prior. The Core CPI Y/Y is expected at 3.3% vs. 3.3% prior, while the M/M
figure is seen at 0.3% vs. 0.3% prior.

At the latest
Fed’s decision, Fed Chair Powell said that they expect bumps on inflation and
that one or two bad data months on inflation won’t change the process. This
keeps the 25 bps cut in December in place even if we get higher inflation
readings.

The market though
is forward-looking, and the rise in Treasury yields showed that the market sees
risks to the inflation outlook. Moreover, the red sweep could increase those
fears if the progress on inflation stalls, or worse, reverses.

Therefore, higher
inflation readings might not change the near-term monetary policy outlook, but
I personally see it changing the market’s outlook and eventually the Fed’s one.

Central bank speakers:

• 09:45 GMT – BoE’s Mann (hawk – voter)
• 14:35 GMT/09:35 ET – Fed’s Logan (neutral – non voter)
• 18:00 GMT/13:00 ET – Fed’s Musalem (neutral – non voter)
• 18:30 GMT/13:30 ET – Fed’s Schmid (hawk – non voter)

This article was written by Giuseppe Dellamotta at www.forexlive.com.