CPI all that matters today
This Daily Digest will cover:
- 🚨 CPI all that matters today
- 🇯🇵 Huge yen cross demand yesterday
- 🪙 BTC and ETH dip below support but find plenty of buyers
Today is all about 3 letters and whilst normally for me those are BCB, today it is CPI.
Expectations are for the year on year number to show a drop to 6.2% with the core showing a slight rise to 0.5 month on month. It rarely pays to pre-position on these events as I found out to my cost yesterday with my short GBP position and whilst I still have a preference for long USD there is every reason to wait and see today. The recent whip in stocks, FX and Crypto has left the market low on positions and flexible to react today so I shall join the herd.
To me the event risk is skewed to the topside for the reaction to the number. The FOMC have made it clear that, whilst they are happy inflation is coming down, they are resolute there is more work to be done. Should we get a stronger number any thoughts of a pause/pivot will have to be consigned to the draw marked “story for another day”. A slightly weaker number probably doesn’t move the needle enough so it will take a headline of 6 or below to really get the risk on/USD lower trade going again in earnest.
A strong number means we need to look at positioning and there are two trades that spring to mind-short USD yen and long Crypto. These are really the only trades out there where positioning remains high and a number 6.4 or above to me sees 135 USD yen and BTC back to 20,600. A weak number and the Crypto uptrend should reassert itself after yesterday’s sell off was met with walls of buyers.
Good luck as always!
