Forex: the CPI is the new NFP for the markets, follow today's publication closely (HSBC)

HSBC explains that the forex now gives more importance to the CPI than the NFP and advises to wait for the publication today before positioning oneself on the dollar.

"The CPI is gradually becoming the new NFP, and the forex is already focusing on today's report. From 2012 to 2016, the CPI was unimportant so the markets were entangled in the new norm, a period of low volatility resulting from the economic data.

So the CPI publication has been very irrelevant for several years, but it is now gaining momentum, while diverging significantly from economists' forecasts, adding grief to the Fed's hawkish members and market participants hoping for a further rise in December.

Simultaneous to the rise in this CPI volatility (relative to expectations), the movements of the dollar on the forex on the day of publication of the CPI have become very important in recent months.

Upon examining USD/JPY movements 30 minutes after CPI and NFP publications during the past 13 months, the growing importance of the CPI is clearly evident.

So while the current dollar rebound is interesting, it does not mean much as long as we have not observed today's CPI."