Read full post at forexlive.com
Later
today,
Thursday,
11
July
2024,
we
get
the
US
consumer
inflation
data.
What
to
expect.
This
snapshot
from
the
ForexLive
economic
data
calendar,
access
it
here.
Taking
a
look
at
the
range
of
expectations
compared
to
the
median
consensus
(the
‘expected’
in
the
screenshot
above)
for
the
key
data
points:
June
CPI
Headline
y/y
range
of
estimates
showing:
3.0%
to
3.3%
June
CPI
Headline
m/m
range
of
estimates
showing:
0.0
to
0.2%
June
CPI
excluding
food
and
energy
(the
core
rate
of
inflation)
y/y
range
of
estimates
showing:
3.3
to
3.5%
June
CPI
excluding
food
and
energy
(the
core
rate
of
inflation)
m/m
range
of
estimates
showing:
0.1
to
0.3%
***
Why
is
knowledge
of
such
ranges
important?
Data
results
that
fall
outside
of
market
low
and
high
expectations
tend
to
move
markets
more
significantly
for
several
reasons:
Surprise
Factor:
Markets
often
price
in
expectations
based
on
forecasts
and
previous
trends.
When
data
significantly
deviates
from
these
expectations,
it
creates
a
surprise
effect.
This
can
lead
to
rapid
revaluation
of
assets
as
investors
and
traders
reassess
their
positions
based
on
the
new
information.
Psychological
Impact:
Investors
and
traders
are
influenced
by
psychological
factors.
Extreme
data
points
can
evoke
strong
emotional
reactions,
leading
to
overreactions
in
the
market.
This
can
amplify
market
movements,
especially
in
the
short
term.
Risk
Reassessment:
Unexpected
data
can
lead
to
a
reassessment
of
risk.
If
data
significantly
underperforms
or
outperforms
expectations,
it
can
change
the
perceived
risk
of
certain
investments.
For
instance,
better-than-expected
economic
data
may
reduce
the
perceived
risk
of
investing
in
equities,
leading
to
a
market
rally.
Triggering
of
Automated
Trading:
In
today’s
markets,
a
significant
portion
of
trading
is
done
by
algorithms.
These
automated
systems
often
have
pre-set
conditions
or
thresholds
that,
when
triggered
by
unexpected
data,
can
lead
to
large-scale
buying
or
selling.
Impact
on
Monetary
and
Fiscal
Policies:
Data
that
is
significantly
off
from
expectations
can
influence
the
policies
of
central
banks
and
governments.
For
example,
in
the
case
of
the
inflation
data
due
today,
weaker
than
expected
will
fuel
speculation
of
nearer
and
larger
Federal
Open
Market
Committee
(FOMC)
rate
cuts.
A
stronger
(i.e.
higher)
CPI
report
will
diminish
such
expectations.
Liquidity
and
Market
Depth:
In
some
cases,
extreme
data
points
can
affect
market
liquidity.
If
the
data
is
unexpected
enough,
it
might
lead
to
a
temporary
imbalance
in
buyers
and
sellers,
causing
larger
market
moves
until
a
new
equilibrium
is
found.
Chain
Reactions
and
Correlations:
Financial
markets
are
interconnected.
A
significant
move
in
one
market
or
asset
class
due
to
unexpected
data
can
lead
to
correlated
moves
in
other
markets,
amplifying
the
overall
market
impact.
Leave a Reply