How to read a CPIrelease in 30 seconds.
Knowing how to read CPI is 1 of the most useful skills in trading, because inflation drives rate expectations. A CPI release has 4 numbers, and in 30 seconds you should know which 1 matters.
Here is the order we read them in.
Headline versus core
Headline includes everything. Core leaves out food and energy, which jump around. Central banks watch core more closely.
Month versus year
The yearly number moves slowly. The monthly number shows the latest trend. A hot monthly core print is what moves rate expectations.
Actual versus forecast
Compare every number to its forecast in the calendar. The surprise, not the level, moves the market.
Use it in real trading
The tool informs the decision, it never makes it. Here is how it plays out on real trading days.
Core m/m comes in above forecast. Cut odds fall, the dollar jumps. Your bearish EURUSD plan is confirmed.
Headline is hot, core is soft. The market follows core, so the dollar dips after a first jump.
Mistakes to avoid
- Reacting to headline and ignoring core.
- Comparing to last month instead of the forecast.
- Trading the first second after the release.
What makes it different
The calendar shows actual, forecast and prior with the surprise, and the Scenario Desk prepares the outcomes before the number.
Questions
Which CPI matters most?
Core CPI, especially the monthly figure.
When is US CPI released?
Usually mid-month at 13:30 London time.
Why did the market ignore a hot number?
Maybe core was soft, or it was expected.