The reaction to the last Non-Farm Payroll print was based on the view that the Federal Reserve would not need to pivot and a 75 bps rate hike was coming. This resulted in negative stocks, negative precious metals, and gains for the USD. This is also the blueprint of what we should expect from incoming US data. If the data means the Fed won’t need to pivot expect the reaction outlined previously. If the data means the Fed will need to pivot then expect the opposite reaction (positive stocks, positive precious metals, negative USD).

Trading US CPI

On Thursday we will have the US CPI print and these are the expectations:

Here are the likely reactions and what we can expect from different instruments on different data prints. Remember, that the likely reaction to the Fed’s need to pivot has been pretty consistent over the last few weeks.

The reaction to a miss

If the US core print comes in below minimum expectations at 6.4% and the headline comes in below the minimum of 7.9% expected then that should support stocks, weaken the USD, and lift gold and silver. That would likely be the best tradable outcome as well since it would be counter to the reaction post the Non-farm payroll.

The reaction to a beat

Another alternative possible trade would be if the US core print comes in above the market’s maximum expectations at 7.3% and the headline over 8.3%. In this instance, we would expect selling to continue in stocks, more USD strength, and further downside in precious metals. However, the best tradable outcome would be a miss on the data to the downside.