US CPI preview: Disinflation has begun, but will it be fast enough for the Fed?
KEY TAKEAWAYS:
- The US CPI report for January will be released at 8:30ET (13:30 GMT) on Tuesday.
- Traders and economists are projecting headline CPI to come in at 6.2% y/y, with the core (ex-food and -energy) reading expected at 5.4%.
- The US CPI report is now THE single economic release with the largest expected market movement, so traders should be sure to prepare.
When will the US CPI report be released?
The US CPI report for January will be released at 8:30ET (13:30 GMT) on Tuesday.
What are traders expecting from US CPI?
Traders and economists are projecting headline CPI to come in at 6.2% y/y, with the core (ex-food and -energy) reading expected at 5.4%.
US CPI preview
As Federal Reserve Chairman Powell and his band of merry central bankers have been eager to emphasize in recent weeks, the “disinflation process” has undoubtedly begun…but that doesn’t mean that the Fed’s job is done. The central bank wants to see inflation fall closer to its 2% target before waving the “mission accomplished” flag, and this CPI report marks a critical checkpoint along the way.
Looking at implied volatility in the options market, the US CPI report is now THE single economic release with the largest expected market movement, so traders should absolutely have this release marked with the bullet on their calendars.
In terms of the components of CPI to watch, used car prices will be the wild card. After falling sharply in recent months, anecdotes suggest that used vehicle prices rose sharply in January, creating a potential upside risk for the headline report.
Separately, recent benchmark revisions to the December CPI report pushed the figure up to +0.1% from -0.1%, suggesting that price pressures may be relatively more entrenched than previously estimated, and if this CPI report reflects that view (above 6.5% / 5.5% core), we would expect risk assets like US indices and the Australian dollar to fall at the expense of bonds and the US dollar as traders start to price in an outside shot of a 50bps rate hike at the Fed’s next meeting in March.
Meanwhile, a softer reading (below 6.0% / 5.3% core) would validate the market’s view that price pressures are well and truly in remission, likely boosting the bullish case for risk assets and leading to selling in safe haven assets like the US dollar.
Technical view: USD/JPY
Speaking of the greenback, USD/JPY has clearly broken out of its multi-month bearish trend channel, raising hopes that it could now form an uptrend in the coming weeks. However, we would remind readers that the end of a downtrend doesn’t necessarily mean the immediate beginning of an uptrend; instead, prices could simply move sideways (or even trend lower at a slower pace!), especially if the CPI report is inconclusive.
To the topside, the February high just below 133.00 could be in play on hot CPI reading, with the year-to-date high at 134.50 worth watching above that. Meanwhile, a cooler-than-expected CPI print could quickly take USD/JPY back toward its February lows in the lower 128.00s.
Source: StoneX, TradingView
Regardless of how this month’s CPI report prints, it’s clear that we’re in a new regime where inflation data trumps all other releases, and traders who ignore this shift do so at their own peril.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2025