The highlight of the week on the US economic calendar is Thursday’s consumer price index report.
Importantly, this report is the anniversary of the September 2022 CPI report and that one marked the bottom of the Nasdaq. On that day, the US reported a hotter CPI report but the market concluded that the peak was near.
Nasdaq after Sept 22 CPI
Ultimately, that proved to be the case as September 2022 core CPI at 6.6% marked the top on the way to 4.3% in August and an expected reading of 4.1% on Thursday.
US core CPI y/y
Headline CPI had peaked in June on the oil price spike but had remained stubbornly high through September before a quickening drop. Notice the recent bounce though, which is also energy related. The consensus for Thursday’s report is a dip to 3.6% but if current oil prices hold, that will fall further next month.
US CPI yy
The bigger question is: Does the market even care?
If you look at bond market pricing, it’s something of a foregone conclusion that inflation will return to target. The market has priced in that the Fed will remain at peak rates for some time and the recent rise in long-dated yields will slow borrowing and activity further.
Wednesday’s PPI report might have been a sign of how trading will go. It proved to be hotter than the consensus but after a 20-pip kneejerk reaction higher in the dollar, it quickly reversed and fell to the lows of the day. Unlike last October, when there was a 7% swing in the Nasdaq on the report, there just isn’t the fear about inflation and Fed rates that there was a year ago.