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USD Index, US CPI Data: Outlook with Q4 Results of US Banks

Following some significant U.S. economic statistics, such as (NFP) and ISM services, the Dollar Index (DXY) finished the previous week on the defensive. This week, investors are eyeing several macroeconomic events planned for the US and other countries, with US CPI taking center stage. Earnings season resumes in the US, with major banks on the deck by the close of the week.

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Dollar Index (DXY)

After the recent falling wedge (black) breakout failed to hold above the 105.00 psychological resistance handle, the daily DXY price action did not continue to go higher. 

The Relative Strength Index (RSI) is trading below the midway 50 levels and below the 200-day SMA, indicating that the overall trend is still bearish (blue). 

The CPI for the following week is likely to provide some directional bias, which should keep the DXY rangebound until then.



Stocks and Forex

Beginning with the first week of 2023, the mood on the world stock markets brightened. The Dow Jones, S&P 500, and Nasdaq 100 all had gains on Wall Street of 1.23%, 1.19%, and 0.87%, respectively. 

Dow Jones 6M

Dow Jones 6M

S&P 500 6M

S&P 500 6M

The FTSE 100 and DAX 40 rose by 2.49% and 4.93%, respectively, on the other side of the Atlantic. The Hang Seng Index and ASX 200 both experienced gains in the Asia-Pacific area, rising by 6.33% and 1.28%, respectively.

The Hang Seng Index closed at its highest level since July 2021, and this helped boost the Yuan as investor confidence in China’s economy increased. The warm weather in Europe aided in the decline of crude oil.

When it came to currencies, the US Dollar had a mixed bag. While the British Pound and Australian Dollar thrived, the Euro and Japanese Yen lagged.

To determine where the true story lay, you would need to look at Treasury yields. Since February 2022, the 10-year rate has decreased the greatest. Gold increased by 2.38%, the biggest since late November, thanks to declining bond yields.

In order to temper longer-term hawkish Federal Reserve policy expectations, traders concentrated on declining average hourly wages and a miss in US ISM services data.  

US CPI Release

All eyes will be on the Thursday due, much-regarded US inflation report. It will be fascinating to watch if December’s softer average hourly earnings have an impact on the announcement of the US CPI next week.

A 50bps increase in interest rates would be possible if the CPI was higher than expected, while a 25bps increase would be more likely, leaving the DXY open to a leg down. 

Expectations for a further slowdown in CPI are likely to be raised by worse average hourly wages. Traders of the pound will anticipate the most recent UK GDP data. 

Read A 2023 Beginners Guide To Buying And Selling Currencies

CPI Matters to Forex Traders

Why CPI Matter To Forex Traders

The Consumer Price Index, or CPI, is a crucial economic indicator that major economies issue on a regular basis to provide a timely snapshot of current growth and inflation levels.

When the CPI tracks an economy’s purchasing power and the cost of goods and services, it is possible to use this information to affect a country’s monetary policy.

The consumer price index, or CPI, is determined by averaging price increases for each item in a preset basket of consumer products, such as food, energy, and services like medical care.

Due to its aforementioned impact on monetary policy and the subsequent effect on interest rates, which directly affect currency strength, it is a helpful indicator for forex traders. 

Below, it will be discussed how useful it is for forex traders to understand how to interpret CPI.

Other Economic Reports

January’s Michigan consumer sentiment data will cap off the trading week and is anticipated to edge higher, demonstrating optimism among American consumers.

This week, CPI statistics from China and Tokyo will also be part of the significant global economic data. Investors widely anticipate the release of China’s December economic data in the wake of the lifting of Covid lockdowns and restrictions in the nation.

Jerome, BoE, BoC to Speak

In Stockholm, the Swedish Riksbank will organize a panel discussion on “Central Bank independence and the mandate – changing views,” in which Fed Chairman Powell will participate. 

Traders will be keeping an eye out for Powell’s comments because he hasn’t made any public statements since the FOMC press conference in December. 

Other important speakers included Bailey from the Bank of England, Macklem from the Bank of Canada, and Kuroda from the Bank of Japan, who will soon be leaving the institution. 

UK November GDP Data

Additionally, the UK will release its November GDP figures. The unemployment report from the European Union is the most significant one, and on January 11, Russia will release its inflation report. 

The Office for National Statistics (ONS) reports that the GDP decreased by 0.3% from the same time in the prior year in the three months leading up to October 2022. 

The services industry increased by 0.6 percent in October 2022 after declining by 0.8 percent in September 2022.

US Q4 Earnings Season

The financial, information technology, and retail sectors’ corporations have all released earnings statements this week that are of substantial economic significance. The US earnings season for the fourth quarter begins on January 9 with a report from Jefferies Financial. 

Major banks like JP Morgan Chase, Citigroup, Wells Fargo & Company, and Bank of America will release their Q4 reports on January 13. 

The financial results of UnitedHealth Group and Delta Air Lines will also be disclosed.

For more news, follow our Market Analysis Section to have a preview of the markets, actual consensus on the markets, dollar rate, new year market news, inflation news, a forex trading session, price changes, today in the markets, more analysis, and any other useful information. 

Read the following in the Forex Education Section 

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  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.