What we expect from today’s CPI release.

The broader markets are still largely adhering to the post-election sentiment this week. However, today will bring something different as the focus will be on the U.S. Consumer Price Index (CPI) report. While inflation data has not been as significant in recent months, it could still impact trading sentiment. This is particularly true if the disinflation process encounters some obstacles along the way.

With the expectations for today’s report, it seems that at least the forecasts for October may confirm this.

According to Goldman Sachs, lower disinflationary pressure should be observed from weaker components such as airline ticket prices and used cars. Their forecasts indicate that the former will increase by 1.0% this month, and the latter by 2.5%. This forms part of the rationale.

Overall, today’s report is not expected to provoke a significant reaction if the figures are within expectations. I believe that the balance of risks at the moment leans towards a stronger reaction in case of a positive surprise, compared to a weaker response in the event of a downside miss.

Federal funds futures indicate about a 63% probability of a 25-basis-point rate cut in December, a probability that has decreased since last week. In the event of a positive surprise, the chance for a substantial shift in this forecast is much higher compared to a negative surprise. So, this is the key consideration right now.

Here’s Goldman Sachs’ strategic plan for the reaction of the S&P 500: