Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar

Macro Insights: Pivotal week ahead with US CPI and Fed meeting on the radar

Macro 4 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  Big week ahead keeping investors on edge as US CPI is likely to soften but the PPI release from Friday has awakened the case for an upside surprise. Focus quickly turns to the last FOMC meeting of the year with 50bps rate hike widely priced in but significant wage pressures laying the case for higher-for-longer. We discuss what to watch in the updated dot plot and Chair Powell’s press conference, and how it can move the markets.

Even the middle of December doesn’t seem to be getting any quieter yet, and this week brings a host of Tier 1 economic data and a flurry of central bank meetings that can cause considerable volatility. In addition, we have the China reopening momentum extending further, and hopes of more stimulus measures especially for the property sector. Geopolitics is also taking another turn as Putin continues to threaten the use of nuclear and also risk of a production cut in crude oil is seen as a response from Russia to the G7 price cap that was set last week. It is unlikely that we will get a quiet end to the year.

The bigger focus for this week will still be the US CPI (scheduled for release on Tuesday 13 Dec at 9:30pm SGT), where investors are starting to get nervous about an upside surprise especially after Friday’s November PPI report that was above expectations broadly. The market reaction to that PPI report was erased quickly, but that may not be the case for CPI. We can expect a moderation this week on the back of easing supply chain pressures, stable gasoline prices and holiday discounts from retailers to clear inventories. However, the Cleveland Fed CPI model suggests upside risks vs. consensus expectations with a 7.5% Y/Y print for headline and 6.3% Y/Y for the core (vs. consensus of 7.3% Y/Y and 6.1% Y/Y respectively).

We believe the narrative really needs to shift from peak inflation to how low inflation can go and how fast it will reach there? Consensus expects 0.3% M/M for both the headline and the core – anything lower than that can cause the markets to rally but will also provoke the Fed to send in a stronger message the following day to convey its message of avoiding premature easing.

The Fed meeting next day (Thursday 15 Dec 3am SGT) is broadly expected to deliver a 50bps rate hike, which will mean cumulative hikes of 425bps this year. It is unlikely that the CPI print from a day before could change that. While this is a step down from the four consecutive 75bps rate hikes seen in the last few month, more important for the markets will be to watch for:

How high do the terminal rate expectations go?

Anything above 5% is still a bearish surprise for the markets, but the dot plot will have to show terminal rates to be in the 5.25-5.50% area to sound a hawkish alarm. If the dot plot signals a peak rate of 4.9%, it could signal to the markets that the Fed is starting to get worried about recession and may soon pause or pivot.

Is the decision unanimous?

Most of the Fed members recently have conveyed a very similar message. But any split votes, with the more hawkish members Bullard and Powell still preferring a 75bps rate hike, could be a hawkish surprise.

Inflation and GDP growth outlook

Any signs of upside risks to inflation from China’s reopening or easing financial conditions could be interpreted as hawkish. On the other hand, if the Fed talks about the lag effect of policy rate hikes, that will likely sound dovish. It will also be key to watch how Fed views the incoming data and its thoughts on recession concerns.

Powell’s press conference

How strong a pushback we get on 2023 rate cuts priced in by the markets. Could Powell open the door to a further step down to 25bps from February? Does he still see the risk of over-tightening to be less severe than the risks of under-tightening?


What to watch?

US Dollar

USD reversed sharply lower after the softer October CPI print, after a strong 5-month run from the greenback. The positioning is far more balanced now, with the biggest pullback risk seen in sterling which has been one of the biggest gainers (after the NZD) in the G-10 basket since the November 10 release. A more dovish turn by the markets could make EURUSD breach 1.06 resistance and bring 1.08 in focus, while USDJPY could break below the 200-dma at 135.16.

S&P500 and NASDAQ100

S&P500 failed to break above the trendline resistance around 4,100 earlier this month but broke below trendline support at 3,992 last week. Next key support level for S&P500 is at 3,906 before 3,900 comes into view. A dovish surprise could bring a break above 4,000 again. Meanwhile, bear trend for NASDAQ100 could resume if it closes below 11,450.

Source: Saxo Markets
Source: Saxo Markets


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992