The main macroeconomic event of next week will be the release of US inflation data for September. The data will be published on Wednesday, October 14 at 15:30 Moscow time. The market expects headline inflation to accelerate, but at the same time a slight slowdown in the monthly core reading.
What the market expects from CPI
The headline consumer price index is expected at +0.6% month-over-month. A month earlier, growth was +0.4%. In annual terms, inflation is expected at 3.6% versus 3.4% previously. Core CPI, which excludes food and energy, is expected at +0.2% month-over-month versus the previous +0.3%. The annual core reading may accelerate to 2.5% from 2.4%.
Why the forecast looks contradictory
Headline CPI may accelerate noticeably, while monthly core inflation, on the contrary, declines. Therefore, for the market, not only the final figure will matter. The main question is where exactly price growth is forming. If the acceleration is mainly driven by energy, the reaction may be softer. If growth begins to spread to services and other sticky categories, the market may strengthen expectations of a tighter Fed policy.
Why CPI is so important for markets
Inflation directly affects expectations for the Fed rate. Stronger data may support US Treasury yields and the dollar. For gold and stock indices, such a scenario could create pressure. Weaker inflation, on the contrary, may reduce expectations of further tightening and support risk assets. What will happen before the release Before the CPI release, the market will receive several speeches from heads of major central banks. At 08:30 Moscow time, Bank of England Governor Andrew Bailey will speak. At 09:05 Moscow time - Bank of Canada Governor Tiff Macklem. At 11:30 Moscow time - ECB President Christine Lagarde. This creates an additional backdrop for the euro, pound and Canadian dollar even before the US statistics.
What will be released on Thursday
On October 15, the calendar will again become busy. At 09:00 Moscow time, UK GDP data for August will be released. The market expects a decline of 0.1% month-over-month after growth of 0.4%. At 15:30 Moscow time, the US will publish four reports at once. Producer prices are expected to rise by about 0.5%. Retail sales may add 0.3% after growth of 1.2% a month earlier. Initial jobless claims are expected at about 195 thousand. The Philadelphia Fed business activity index is forecast at 26.5 versus 37.8 previously.
What else is important during the week
On Thursday morning, Australian employment data will be released. The market expects an increase of about 20 thousand jobs after 39.5 thousand previously. Unemployment is expected at 4.6%. On Friday at 06:30 Moscow time, a speech by Fed representative Kevin Warsh is scheduled.
Possible scenarios
Scenario A: CPI comes in close to expectations. In that case, the initial reaction may quickly fade, and the market may return to its previous range.
Scenario B: core inflation deviates noticeably from the forecast. Then sharp moves are possible in the dollar, bond yields, gold and stock indices. A particularly strong first candle may be accompanied by false breakouts of the nearest levels.
What's next
After CPI, the market will switch to the block of US statistics on October 15. The combination of inflation, retail sales and the labor market will give a more complete picture of the economy's condition. For the Fed, it is important to understand two things at once: how persistent price pressure is and whether the economy is beginning to slow noticeably.
Waiting for 15:30 with an open position?
The first minutes after CPI are often accompanied by wider spreads, slippage and sharp moves in both directions at once. For a prop trader, the rules of the specific program are especially important here. Somewhere entry a few minutes before the release is prohibited, somewhere restrictions apply to holding a position during the news, and the rules for accounting for slippage and daily drawdown may differ. Such conditions are better checked before the data is released.