Digging deeper on what's expected for the July US CPI report

<p>The highlight of the week on the US economic calendar is Thursday's US CPI report. The market is cautiously optimistic about the state of inflation in the US but the July CPI report will go a long ways towards solidifying that or raising new questions.</p><p>The market will be watching both the headline number and the core.</p><p>Headline CPI expectations:</p><ul><li>m/m +0.2%</li><li>y/y +3.3%</li></ul><p>Drilling down deeper into the headline numbers, there may be a slight bias upwards. Of the 78 estimates tracked by Reuters, the vast majority are at +0.2% but there are just 7 that are below +0.2% while there are 21 above.</p><p>Core CPI expectations:</p><ul><li>m/m +0.2%</li><li>y/y +4.8%</li></ul><p>Similar to the headline, the bias is higher with just 5 estimates below +0.2% and 21 above.</p><p>For the m/m number, I expect that market participants will be drilling down to the second decimal and that might present a different picture with many firms in the +0.15 to +0.2% range. Here is a sampling of estimates.</p><p>Given the market's sensitivity to this data, I expect a substantial difference in the market reaction between +0.16% and +0.24% m/m.</p><p>Overall, there is a bias towards a higher number here but how does that suggest trading it? I'll have that in a separate post.</p>

This article was written by Adam Button at www.forexlive.com.