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

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.