Good for Forex, Good for Stocks

Yesterday's CPI figure taught us two important lessons. The first one is that good sales numbers usually come with a higher inflation. The other lesson is that every market interprets data differently. The two markets in this story are the forex market and the stock market.

First, the expected CPI was +0.5%, which is not a small increase. However, the real CPI came out to be +0.6%. Usually, such a small difference does not make such a big impact. However, due to the upcoming Fed meeting, this number is very important.

The stock market reacted with joy to the fact that the Fed is not going to raise the interest rates, as many feared. The S&P index went up by 1.5%, the Dow jumped 1.37%, and the Nasdaq surged over 2%, probably do to the Yahoo-Google agreement.

On the other hand, the dollar rose against all major currencies. The reason for this rise is the completely eliminated risk that the Fed is going to lower interest rates. Inflation is too high, so the Fed can't lower the interest rate and boost inflation. Forex Tracer managed to pull out two quick trades out of this fall in EUR/USD.

As you can see, different market interpret the same data differently. As a trader, you need to know which way to trade on different news, or not trade at all during that times. Know your market and know your pairs.

Have a great weekend,
Nadav

nadavs