USD strength caused by Core CPI prints in the 0.3-0.4% MoM range to fade – Credit Suisse

How to trade the December US Consumer Price Index (CPI) data release? Here is the Credit Suisse’s cheat sheet.

The hitchhiker’s guide to trading US Dec CPI data

“Core CPI prints of 0.2% MoM or lower should solidify expectations of a 25 bps hike at the 1 Feb FOMC, causing the weak USD trend to likely extend further.”

“Readings between 0.3% and 0.4% MoM might initially be seen as disappointing relative to market-implied expectations, but likely will not change the overall narrative, especially in FX where USD topside is still trading at a small premium: we would be inclined to fade resulting USD strength.” 

“Readings above 0.4% MoM on the other hand would call for more caution and represent an important tail risk to our near-term bearish USD view set.” 

“A print of 0.6% MoM or higher would likely lead to a turbulent repricing in Fed policy expectations, a weak reversal in risk appetite and generalized USD strength in all pairs.”

See – US CPI Preview: Forecasts from 10 major banks, price pressures to ease further