Here is the short version. September CPI came out this morning and it was hotter than expected. Our DXY Bias Score first rose from +4 to +5 because of the report, then to +6 after traders raised their bets on a rate hike in October. That is the data side. The price side is still open. In our October 10 post, GBPUSD was going its own way while the dollar index and EURUSD said the dollar was strong. Today's close is the first real answer, so this post shows what to check.
What CPI showed
CPI measures how fast the prices of everyday things are rising. The headline number includes everything. Core CPI leaves out food and energy because they jump around, so it is the number the Fed pays most attention to. The “expected” column is the Dow Jones survey of economists.
| September CPI | Result | Expected | Last month |
|---|---|---|---|
| Headline, month | +0.6% | +0.6% | +0.4% |
| Headline, year | 3.7% | 3.6% | 3.4% |
| Core, month | +0.3% | +0.2% | +0.3% |
| Core, year | 2.6% | 2.5% | 2.4% |
In plain English: the monthly headline matched what economists expected, but the yearly rate went up instead of staying flat, and core came in a little hotter than expected on both measures. The extra push came from two places. Petrol (gasoline) prices jumped 9.1% in one month, which was more than half of the total monthly rise. And shelter costs rose 0.4%, up from 0.3% in August, which is a slow-moving part of prices that does not usually fade quickly. Food prices were flat.
How the score went from +4 to +6
- This morning: +4. Before the report, the score was +4.
- After CPI: +5. The CPI part of our score compares the yearly rate with last month. It went from 3.4% to 3.7%, so that part changed from neutral (0) to bullish (+1).
- After the futures market moved: +6. Traders use CME FedWatch to bet on what the Fed will do. The chance of a rate hike at the October 27–28 meeting jumped from 19.4% to 34.9%. Our score gives a point when that chance is above 30%, so the CME part also went from neutral to bullish.
Keep this in mind: no change is still the most likely result for October, at 65.1%. A 34.9% chance of a hike is a real risk, not a forecast. The score reads reports and market odds. It does not read the chart.
Why it is not a one-way story
The latest jobs report, for September, was weak: 29,000 jobs against 84,000 expected, and the two months before it were revised down. So the Fed is looking at prices that are rising faster and a job market that is cooling at the same time. That is why the hike chance rose but did not take over. Two more reports will help it decide: PPI tomorrow and PCE on October 29.
Back to the GBPUSD test
In the October 10 post we said GBPUSD was holding up while the dollar index was strong and EURUSD was falling. We set out two scenarios. In Scenario B, inflation comes in higher than last month, the dollar gets stronger, and GBPUSD slips back to join the others. Higher than last month is what the data showed today, so the data points to Scenario B. But a number on a screen is not a price on a chart. The close will tell us whether the market agrees.
What to check at today's close
Use the daily close, not the first few minutes. Candles right after a big report move wildly and often reverse.
| The dollar gets stronger | The market looks past the news | Not clear yet | |
|---|---|---|---|
| GBPUSD | Closes below 1.3183 | Closes above 1.3249 | Closes between 1.3183 and 1.3249 |
| Dollar index | Closes above 102.24 | Gets rejected under 102.24 | Stays near 102.24 |
| EURUSD | Closes below 1.1162 | Holds above 1.1162 | Stays near 1.1162 |
| What it means | Scenario B: GBPUSD joins the others | Scenario A: GBPUSD was right, and the news was probably already priced in | Wait for PPI tomorrow |
| What a trader could look for | Sell setups on EURUSD or GBPUSD, with extra care on gold and Bitcoin buys | Buy setups only after a clear chart signal, not just because CPI was hot | No trade is a fine decision |
If the dollar falls even though CPI was hot, do not assume the score is wrong. Traders may have expected a hot number and already bought the dollar before the report. We explained how that works in why price often moves before the news. In that case the chart is telling you something the score cannot, which is why we watch both.
A simple game plan
- Today: if you did not trade the release, do not chase it now. Wait for the daily candles to close and compare them with the table above. Mark GBPUSD 1.3183 and 1.3249, the dollar index 102.24, and EURUSD 1.1162 on your daily charts.
- Tomorrow, PPI (8:30 ET): PPI shows price changes for producers and businesses and often hints at where consumer prices are heading. Economists expect +0.6% on the month and 5.5% on the year. If PPI is also hot, the picture gets clearer. If it comes in soft, the CPI reaction may fade. If the two disagree, stand aside.
- Then pick one scenario and use your usual entry rules. Put your stop loss beyond the last swing high or low on the chart, and risk only a small part of your account on each trade (many traders use 1–2%). Our notional value guide shows how to check how big your trade really is.
- Gold and Bitcoin usually move the opposite way to the dollar. Our Bitcoin plan only buys if the price reaches $74,890 and the dollar gets weaker. Today's data does not give a weaker-dollar signal, so that plan is still waiting.
What our score could do tomorrow
The score is +6 now. After PPI it could land like this, compared with August's yearly PPI of 5.4%:
- PPI lower than 5.4%: the score falls to +4, or to +3 if the monthly figure is far from the forecast.
- PPI the same at 5.4%: the score falls to +5.
- PPI higher than 5.4%: the score stays at +6.
- PPI higher and the monthly figure is more than half a point away from the forecast: the score rises to +7.
The CME part can also move the score on its own. If the chance of a hike falls back under 30%, the score loses a point. So the score is likely to keep saying bullish, but it can move by a point or two in either direction from day to day.
The risks
- One day's close is a small sample. GBPUSD may be moving for UK reasons that have nothing to do with the US.
- CME odds change every day. The 34.9% reading can be gone by tomorrow.
- Reports can surprise in ways neither scenario covers.
- Never risk money you can't afford to lose. This is education, not financial advice.
We will add an update to this post once today's daily candles have closed, so you can see which scenario won. This is the kind of setup our October YouTube series is built for: going from the data, to the score, to the chart, as each report comes out.