We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that U.S. Core Consumer Price Index (CPI) figures are expected tomorrow, February 20th, 13:30 (GMT), and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the majors are the ones most affected by market events in general but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Core CPI, please read below.

What is the “U.S. Core CPI “?

The Core Consumer Price Index (CPI) is an economic indicator that measures the change in the price of goods and services purchased by consumers, excluding food and energy. The indicator is released on a monthly basis and is seasonally adjusted.

There are many versions of the CPI released by the Bureau of Labor Statistics, but Core CPI is the most widely used by forex traders. Food and energy prices make up a large portion of CPI, but they tend to be very volatile and distort the underlying trend. Therefore they are excluded.

Traders follow this survey very closely because consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices can force a central bank to raise interest rates to tame inflationary pressures.

If the Survey Comes Inline with Market Forecasts

Expectations for this quarter reveal that the U.S. Core CPI figures will probably rise from 0.0% to 0.1%.

Previous surveys have shown that publications that go inline with market forecasts tend to support the Dollar. They have also shown that in cases where publications have beaten analysts’ forecasts, the market was greatly impacted, and the USD had instantly risen, usually in a dramatic trend.

Because of the perceived economic weakness in the U.S. economy, any measure near the forecasted value may act as another positive to sustain the USD’s recent bullish run against the EUR. We may see a EUR/USD rate of 1.2550 by the weeks end.

If the Survey Will Surprise With Bearishness

When the actual figure is higher than forecasted, investors are likely to see the USD depreciating against its currency pairs and crosses.

In the face of the global recession, previous indicators relating to inflation have shown consistent declining numbers. If inflationary pressures are present in the market, this could put added pressure on the Federal Reserve. The Fed’s ability to reduce inflation is severely restrained with U.S. interest rates close to 0%. This leads us to believe if Core CPI fails to meet expectations, the USD could move lower against the EUR, possibly to the 1.2750 level.

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We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that the U.S. Trade Balance is expected to be released tomorrow, December 11th, at 13:30 GMT, and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general, but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Trade Balance please read below.

What is the U.S. Trade Balance?

The U.S. Trade Balance is the difference between the amount of goods and services exported versus the amount imported into and out of the United States. A positive number in this report indicates that there is a trade surplus, meaning the U.S. has exported more than it has imported. A negative number is the opposite: a trade deficit, also called a trade gap. A trade deficit results from importing more than the country exports.

This report is issued monthly, usually 40 days after the end of the month. Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation’s exports. Export demand also impacts production and prices at domestic manufacturers. As such, if export demand grows, even marginally, it will indicate that the USD will gain some small momentum to its recent bullish strength. If, however, the trade deficit continues to worsen, the USD could potentially see a reversal.

If the Report Comes In-Line with Market Forecasts

Currently the U.S. Trade Balance, while a negative number historically, is forecast to increase from -56.5B to -53.5B. If this report is indeed released in-line with market forecasts, then it will signify that demand for U.S. exports has increased slightly. Since U.S. goods and services must be bought with USD, the value of the Dollar will have inherently increased as well as a result of this indicator. Likewise, if this indicator is in fact released as an even higher number than forecast, the bullish run in the USD may continue to gain momentum. With a release of this nature, traders may witness the USD resume its previous bullish run and probably test the 1.2500 price level against the EUR once more.

If the Report Surprises with a Contradiction to Market Forecasts

As of now, the U.S. Trade Balance is predicted to indicate that demand for U.S. goods and services has increased and the deficit has shrunk slightly. If, however, this report indicates that this demand has in fact increased less than forecasted, or even decreased, the result will likely convince investors that the U.S. economy is not in as good a shape as previously thought. As the USD has been flat in recent days, a release of this kind may actually force the Dollar into a deeper bearish correction, testing the 1.3200 level against the EUR in the short-term.

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