7 min read Today at 12:30 UTC, the US government releases its latest inflation report, known as the Consumer Price Index (CPI). It’s one of the biggest events on the market calendar, and it can move currencies, gold, stocks and crypto within seconds.
Here’s what you need to know, explained simply.
What is CPI?
CPI measures how much prices are rising for everyday things people buy in the US, like food, fuel, rent and clothes.
- If CPI goes up, prices are rising faster. This is called inflation.
- If CPI goes down, price rises are slowing.
The report comes out once a month from the US Bureau of Labor Statistics (BLS). Today’s release covers prices in September.
Headline vs core: the two numbers to watch
The report gives two main numbers:
- Headline CPI includes everything, including food and energy.
- Core CPI removes food and energy, because their prices jump around a lot from month to month.
Markets usually care more about core CPI, because it shows the underlying trend more clearly.
What the market expects today
- Headline CPI: around 3.6% compared with a year ago, up from 3.4% last month
- Core CPI: around 2.4% compared with a year ago, the same as last month
In simple terms, experts expect overall prices to rise faster, mainly because of fuel, while the underlying trend stays steady.
The chart shows how inflation has moved over the past year. It jumped to 4.2% in May, eased over the summer, and is expected to rise again in September. The dashed line is the 2% level the US central bank aims for, so inflation is still well above target.
Why fuel prices matter so much
Petrol in the US averaged $4.33 a gallon in September, the highest ever for that month, according to AAA. Tensions in the Middle East have kept oil prices high.
When petrol gets more expensive, the headline CPI number goes up. That’s why experts expect a jump today, even though other prices look calmer.
The bigger question is whether high fuel costs are starting to push up other prices too. One example: airfares are up 23.4% compared with a year ago, partly because jet fuel costs more.
Why the Federal Reserve cares
The Federal Reserve (the Fed) is the US central bank. Its job includes keeping inflation close to 2%.
When inflation is too high, the Fed can raise interest rates. Higher rates make borrowing more expensive, which tends to slow spending and cool prices over time.
- In September, the Fed raised rates for the first time since 2023, to 3.75% to 4.00%.
- Its next decision is on 28 October.
- Weak US jobs data earlier this month has made another rise this month look less likely. Markets currently price around 22% odds of a hike in October.
If today’s CPI comes in higher than expected, the chances of another rate rise could go up. If it comes in lower, they may fall.
How CPI can move the markets
Here’s a simple guide to how markets have often reacted in the past. These are possibilities, not guarantees.
- Higher than expected: the US dollar could get stronger, while gold, stocks and crypto may come under pressure
- As expected: markets may not move much, since this is already largely priced in
- Lower than expected: the US dollar could weaken, which may support gold, stocks and crypto
Keep in mind that the first move after the release can reverse quickly, and prices can jump sharply in both directions.
EUR/USD: the pair to watch
EUR/USD shows how many US dollars one euro buys. When the dollar gets stronger, EUR/USD usually falls. When the dollar gets weaker, it usually rises. That makes it one of the markets most directly affected by US inflation data.
Two terms you’ll see on the chart:
- Support is a price level where buyers have stepped in before, stopping the price from falling further. Think of it as a floor.
- Resistance is a price level where sellers have stepped in before, stopping the price from rising. Think of it as a ceiling.
Right now:
- Support at 1.1160: EUR/USD is sitting on this floor right now
- Resistance at 1.1365 to 1.1370: this level used to act as a floor through the summer, but price broke below it in September. Old floors often become new ceilings
- Next support around 1.0890: if 1.1160 breaks, this is the next area where buyers could step in
A higher than expected CPI number could strengthen the dollar and push EUR/USD below 1.1160. A lower than expected number may give the pair room to bounce back towards 1.1365.
What comes next
- Later today at 18:00 UTC: the Fed publishes its Beige Book, a report on how the US economy is doing across the country
- Tomorrow: the Producer Price Index (PPI), which measures prices businesses pay
- 28 October: the Fed’s next interest rate decision
Big news events can bring fast and unpredictable price moves, so it’s worth being extra careful with risk around the release.
Trade Now
Trading involves risk.
Author
Risk Disclaimer
The content provided here is for informational purposes only. It is not intended as personal investment advice and does not constitute a solicitation or invitation to engage in any financial transactions, investments, or related activities. Past performance is not a reliable indicator of future results.
The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. These products may not be suitable for all investors. Before engaging, you should consider whether you understand how these leveraged products work and whether you can afford the high risk of losing your money.
The Company does not accept clients from the Restricted Jurisdictions as indicated in our website/ T&C. Some services or products may not be available in your jurisdiction.
The applicable legal entity and its respective products and services depend on the client’s country of residence and the entity with which the client has established a contractual relationship during registration.
