US CPI Preview: Inflation Uptick Potential after Trump Election, Red Wave

US CPI Key Points

US CPI expectations: 2.6% y/y headline inflation, 3.3% y/y “core” inflation
The Fed is seen as nearly 50/50 to cut interest rates again in December after Donald Trump and the Republicans secured a “Red Wave” last week
USD/JPY is on the verge of a breakout to multi-month highs ahead of a likely uptake in inflation.

When is the US CPI Report?

The October CPI report will be released on Wednesday, November 12 at 8:30 ET.

What are the US CPI Report Expectations?

Traders and economists expect the US CPI report to rise to 2.6% y/y on a headline basis, with the “Core” (ex-food and -energy) reading expected tick up to at 3.3% y/y.

US CPI Forecast

Perhaps more than many assumed, US citizens’ dissatisfaction with inflation and the accumulated price increases over the last few years played a big role in Donald Trump’s election victory last week. With the Republican party also winning majority control of the Senate and House of Representatives, slowing the growth in price increases will be a key priority over the next four years.

Of course, this week’s Consumer Price Index (CPI) report relates to price changes in October, and if the leading indicators and economists’ expectations are accurate, it could show an uptick in price pressures from September. Looking at the CME’s FedWatch tool, traders are pricing in about a 50/50 shot of another interest rate cut next month.

As many readers know, the Fed technically focuses on a different measure of inflation, Core PCE, when setting its policy, but for traders, the CPI report is at least as significant because it’s released weeks earlier. As the chart below shows, the year-over-year measure of US CPI has resumed its decline from the 2022 peak in recent months, though economists are expecting it to bump back up to 2.6% this month:

Source: TradingView, StoneX

As the chart above shows, the “Prices” component of the PMI reports has turned higher over the last month and may continue to rise if another round of tariffs looks likely in the coming weeks.

Crucially, the other key component to watch when it comes to US CPI is the so-called “base effects,” or the influence that the reference period (in this case, 12 months) has on the overall figure. Last October’s 0.0% m/m reading will drop out of the annual calculation after this week’s reading, opening the door for an increase in the headline year-over-year CPI reading as long as the month-over-month reading comes in higher than that.

US Dollar Technical Analysis – USD/JPY Daily Chart

Source: TradingView, StoneX

Turning our attention to USD/JPY, the exchange rate is on the verge of a breakout to multi-month highs above 154.70 as of writing. From a purely technical perspective, the pair looks poised for additional gains after consolidating for the past couple of weeks, though bulls would obviously prefer to see a hot inflation reading to add some fundamental heft to that technical outlook. In that scenario, the pair could make a run toward 157.00 next.

Meanwhile, a cool CPI report could take the pair back into the recent 151.40-154.70 range and accordily increase the odds of another rate cut from the Fed next month.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.