US CPI data due Thursday. Here are the ranges of estimates (& why they’re crucial to know)

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Later
today,
Thursday,
11
July
2024,
we
get
the
US
consumer
inflation
data.

• Due
  at
  1230
  GMT,
  which
  is
  0830
  US
  Eastern
  time.

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.