The US Consumer Price Index (CPI) yearly data is scheduled for release later today. Adding volatility to a recently flat crypto market.
Later today, they will release the Consumer Price Index (CPI) data, sparking speculation of an expected increase in volatility. CPI data often leads to volatile price swings in all markets depending on the outcome of the data.
What Is the Consumer Price Index and Why Is It Important
The Consumer Price Index (CPI) tracks US consumers’ monthly price fluctuations. The Bureau of Labor Statistics (BLS) computes the CPI by taking a weighted average of prices for a selection of goods and services that mirror the overall spending patterns of US consumers.
The CPI is the most commonly employed inflation gauge. It is also closely monitored by policymakers, financial markets, businesses, and consumers alike.
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CPI Data Expectations
The CPI data will release at 8:30 a.m. ET and expectations are that August will show an increase in year-on-year inflation. This inflation data suggests a 3.6% increase compared to the 3.2% in the 12 months ending in July.
The significant 20% surge in oil prices during July and August partially drives the expected monthly CPI and Core CPI increases of 0.6% and 0.2%, respectively. This rise in energy costs will likely contribute to the higher August CPI figure, particularly the 0.6% projection.
Core inflation figures, which exclude the impact of volatile items such as food and energy, often receive more attention from markets. However, given the substantial rise in energy costs, the Federal Reserve is unlikely to ignore the influence of these price increases when formulating its monetary policy decisions.
The central bank may consider the broader picture of inflation, including the impact of rising energy prices, in assessing the overall economic situation.
If the headline CPI indicates a significant uptick in inflation, it may prompt concerns about rising overall price levels, which could influence the Fed’s policy direction to curb inflationary pressures.
Volatility Warning: Trade With Caution
The anticipated year-on-year CPI data reaching 3.6% could potentially strengthen the US Dollar but negatively impact stocks and cryptocurrencies. Expect significant price swings.
Conversely, if the data falls below expectations, the US Dollar could weaken while stocks and crypto rally. However, we won’t know the outcome until they release the data. So, it may be prudent to stay on the sidelines during periods of high volatility.
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