This is one of the most important economic releases for the currency markets, and not only, given the fact that equity markets and the overall markets react the most at anything that is related to inflation. And this is the favoured measured move for inflation, hence high levels of volatility surround the release.
Fed favors the Core cpi, as it shows the change in good and service purchased by consumers, excluding food and energy, and the reason for this is that food and energy prices tend to be extremely volatile and they are distorting the real data. So while the CPI number includes food and energy, the Core CPI indicator is mostly watch by traders as it shows the real inflation levels in the economy.
Inflation is important for traders because rising prices lead to central banks to increase interest rates, and this translates in higher volatility levels in markets.
Looking at the past six month worth of data that we are analyzing and we are seeing subdued levels of inflation which basically confirm the Fed’s view that inflation is not an issue and the interest rates in the United States should stay low for an extended period of time.
The most important things to take into consideration when looking at the Core CPI indicator are the following:
- Release date: monthly, about 15 days after month ends;
- release time: 12:30 GMT during North American trading session;
- first tier data;
- shows inflation levels = extremely important for currency trading!!!