Investors are starting to worry about CPI data
2023.01.11 14:38
Investors are starting to worry about CPI data
By Kristina Sobol
Budrigannews.com – The Labor Department’s most recent reading of the consumer price index is due at 8:30 a.m. on Thursday in Washington, and traders from New York to Chicago to London will be glued to their screens.
Because of what happened last month, many people will actually be keeping a close eye on trading before the numbers even come out.
The monthly CPI, one of the most popular inflation measures used by the Federal Reserve, was scheduled to be released exactly at 8:30 a.m. on December 13. However, during the 60 seconds preceding it, something odd took place. According to a Bloomberg Economics analysis, the volume of trading in 10-year Treasury futures soared to levels three times higher than those seen a minute prior to the publication of any of the previous 24 CPI reports.
J. Christopher Giancarlo, who was the head of the Commodity Futures Trading Commission during the first part of the Trump administration and is now senior counsel at the law firm Willkie Farr & Gallagher, stated that “the volume of trading was quite extraordinary.”
After conducting an initial investigation, the Labor Department dismissed the possibility of a data leak. There has been no indication that the situation is being investigated by regulators like the Securities and Exchange Commission or the Commodity Futures Trading Commission.
When asked how the CFTC plans to monitor the Treasury futures market ahead of the next CPI release, a spokesperson stated that the agency monitors market movements every day. A request for clarification from the SEC was not met.
However, no one has been able to explain what took place, and there is still a lot of speculation that the trading spike was brought on by a leak or hack.
Graham Harper, head of public policy and market structure at Chicago-based DRW, one of the largest trading firms in the world, stated, “I think this demonstrates how important it is to have a release process that has the trust and confidence of market participants, especially during times of economic uncertainty, when the latest statistics are of pivotal importance.” The integrity of the procedure is cast into doubt by the current economic data release mechanism.
Taking No Chances In recent months, as a surge in inflation gripped the public, the report sparked enormous market swings. Barclays’ study (LON:) Plc strategists like Stefano Pascale and Anshul Gupta discovered last year that stocks have never been more negatively correlated with CPI over the past decade.
This next set of numbers is even more important because they will play a significant role in determining whether Fed officials will raise interest rates by half a percentage point for the second meeting in a row or decrease them to a quarter of a percentage point. Economists predict a 0.1% decline in the median CPI and a 0.3% increase in the so-called core CPI, which excludes food and energy.
On Thursday, options traders are anticipating a 2% shift in either direction by the. Data compiled by Bloomberg indicate that, while not insignificant, the reading still falls below a realized move of 3% following the previous five inflation reports.
Giancarlo stated that the situation presents a good opportunity from a regulatory standpoint for government officials to conduct an internal investigation to restore trust in the financial markets by examining the overall release of CPI data. This could reassure markets that the playing field is level.
Joseph Saluzzi of Themis Trading LLC, on the other hand, isn’t taking any chances. He said it was worth being extra cautious this time, and he will look a little more closely at trading in the minutes before the report than he did before the previous data.
According to Chris Ahrens, a strategist at Stifel Nicolaus & Co., “People are going to be more on alert now in that minute before CPI, even as the official sector is saying ‘All is OK, there was nothing that really happened.'” “And in the wake of the payroll numbers, the onus now lies on the inflation numbers to sort of set the table for whether the Fed goes 25 or 50 basis points at their next meeting,” Ahrens said. “And in the wake of the payroll
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