Inflation: 5.9% Increase Of Year To Year US Core CPI?

US inflation data for January is in the spotlight in the markets today. The annual growth rate is expected to break 40-year records, reaching 7.3% compared with 7.0% in December.

Higher oil prices in recent weeks will reinforce the general price index. But more important in this case may be the core CPI, where prices are expected to rise by 0.5% m/m and 5.9% y/y.

US CPI preview: what to expect from new 40-years high - 1

Investors and traders expect this report to determine the Fed's next move in mid-March.

Rising inflation above expectations and new signs that the inflation trend is taking root could reinforce dollar purchases as markets will immediately put into the price a higher chance of a 50 point rate hike in March and set up a determination for further hikes. And that promises to be bad news for the markets.

US CPI preview: what to expect from new 40-years high - 2

Signs that inflation is close to its peak and on a downward path promises to be great news for stock markets and shift the balance towards dollar selling. Interest in equities increases when investors see signs of a sustained turnaround in inflation as they stop fearing the Fed's sharply hawkish stance on suppressing price growth.

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.