Why it's important?

The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market's reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

Distribution of forecasts for PPI

PPI Y/Y

• 2.4% (11%)
• 2.3% (68%) - consensus
• 2.2% (16%)
• 2.0% (5%)

PPI M/M

• 0.4% (2%)
• 0.3% (13%)
• 0.2% (74%) - consensus
• 0.1% (7%)
• 0.0% (2%)
• -0.1% (2%)

Core PPI Y/Y

• 3.1% (12%)
• 3.0% (47%) - consensus
• 2.9% (35%)
• 2.7% (6%)

Core PPI M/M

• 0.3% (57%) - consensus
• 0.2% (40%)
• 0.1% (3%)

Analysis

We can ignore the headline PPI as the market will focus on the Core figures. We can notice that the expectations are skewed to the downside, so a higher than expected reading would be taken as more hawkish and likely give the US Dollar another boost. Conversely, a soft print could trigger a pullback.

The US Dollar remains in an uptrend as the market continues to price out the rate cuts expected in 2025. Right now we have another 25 bps cut priced for December and just two 25 bps cuts priced in 2025 which is already much lower than the Fed's projection of four.

Therefore, there's still a couple of rate cuts to price out in 2025 if the data continues to run hot, but at that point we would need a real acceleration in inflation to have the market pricing in a rate hike. For now, the bar for rate hikes is really high as the maximum the Fed is willing to do is to pause the easing cycle.

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Why it's important?

The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market's reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

Distribution of forecasts for CPI

CPI Y/Y

• 2.7% (2%)
• 2.6% (56%) - consensus
• 2.5% (28%)
• 2.4% (12%)
• 2.3% (2%)

CPI M/M

• 0.3% (17%)
• 0.2% (73%) - consensus
• 0.1% (10%)

Core CPI Y/Y

• 3.4% (8%)
• 3.3% (81%) - consensus
• 3.2% (11%)

Core CPI M/M

• 0.4% (4%)
• 0.3% (82%) - consensus
• 0.2% (14%)

Analysis

We can ignore the headline CPI as the market will focus on the Core figures. We can notice that we have a pretty strong consensus and not much skew on either side.

Nonetheless, there's been a consistent bid in the US Dollar going into this report with Treasury yields higher and stocks kinda rangebound. The market might have already assigned some premium to a higher than expected print, so there's some risk of a short-term "sell the fact" reaction on a higher than expected number.

It goes without saying that a bigger than expected upside surprise should see the momentum increasing immediately with the US Dollar likely rallying across the board and Treasury yields shooting higher.

On the other hand, a soft print will likely see the US Dollar and Treasury yields falling, although one can argue that it's just going to provide a pullback to go long the US Dollar and short bonds again at even better levels as future conditions will likely see inflation getting stuck above the target or even moving back higher.

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Full Text:

The same artificial intelligence technique typically used in facial recognition systems could help improve prediction of hailstorms and their severity, according to a new, National Science Foundation-funded study. Instead of zeroing in on the features of an individual face, scientists trained a deep learning model called a convolutional neural network to recognize features of individual storms that affect the formation of hail and how large the hailstones will be, both of which are notoriously difficult to predict. The promising results highlight the importance of taking into account a storm's entire structure, something that's been challenging to do with existing hail-forecasting techniques.

Image credit: Carlye Calvin

Weather and environmental forecasts made several weeks to months in advance can someday be as widely used and essential as current predictions of tomorrow’s weather are, but first more research and sustained investment are needed, says a new report from the National Academies of Sciences, Engineering, and Medicine.

NASA, the National Oceanic and Atmospheric Administration (NOAA), and the United States Geological Survey (USGS) should implement a coordinated approach for their space-based environmental observations to further advance Earth science and applications for the next decade, says a new report by the National Academies of Sciences, Engineering, and Medicine.

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SUFFOLK– As Tropical Storm Michael approaches, the Virginia Department of Transportation (VDOT) Hampton Roads District stands ready to respond to...

000
WTNT22 KNHC 260250
TCMAT2

POST-TROPICAL CYCLONE OLGA FORECAST/ADVISORY NUMBER 3
NWS NATIONAL HURRICANE CENTER MIAMI FL AL172019
0300 UTC SAT OCT 26 2019

THERE ARE NO COASTAL TROPICAL CYCLONE WATCHES OR WARNINGS IN
EFFECT.

PLEASE SEE HIGH SEAS FORECASTS ISSUED BY THE NATIONAL WEATHER
SERVICE AND PRODUCTS FROM LOCAL NATIONAL WEATHER SERVICE FORECAST
OFFICES FOR INFORMATION ON THE NON-TROPICAL WATCHES AND WARNINGS
ASSOCIATED WITH THIS SYSTEM.

POST-TROPICAL CYCLONE CENTER LOCATED NEAR 27.8N 92.2W AT 26/0300Z
POSITION ACCURATE WITHIN 30 NM

PRESENT MOVEMENT TOWARD THE NORTHEAST OR 40 DEGREES AT 15 KT

ESTIMATED MINIMUM CENTRAL PRESSURE 999 MB
MAX SUSTAINED WINDS 45 KT WITH GUSTS TO 55 KT.
34 KT....... 20NE 20SE 120SW 120NW.
12 FT SEAS.. 90NE 90SE 450SW 90NW.
WINDS AND SEAS VARY GREATLY IN EACH QUADRANT. RADII IN NAUTICAL
MILES ARE THE LARGEST RADII EXPECTED ANYWHERE IN THAT QUADRANT.

REPEAT...CENTER LOCATED NEAR 27.8N 92.2W AT 26/0300Z
AT 26/0000Z CENTER WAS LOCATED NEAR 27.0N 92.5W

FORECAST VALID 26/1200Z 31.8N 90.4W...POST-TROP/EXTRATROP
MAX WIND 35 KT...GUSTS 45 KT.
34 KT... 0NE 100SE 0SW 0NW.

FORECAST VALID 27/0000Z 38.0N 88.5W...POST-TROP/EXTRATROP
MAX WIND 30 KT...GUSTS 40 KT.

FORECAST VALID 27/1200Z 43.5N 83.5W...POST-TROP/EXTRATROP
MAX WIND 30 KT...GUSTS 40 KT.

FORECAST VALID 28/0000Z...DISSIPATED

REQUEST FOR 3 HOURLY SHIP REPORTS WITHIN 300 MILES OF 27.8N 92.2W

THIS IS THE LAST FORECAST/ADVISORY ISSUED BY THE NATIONAL HURRICANE
CENTER ON THIS SYSTEM. ADDITIONAL INFORMATION ON THIS SYSTEM CAN BE
FOUND IN HIGH SEAS FORECASTS ISSUED BY THE NATIONAL WEATHER
SERVICE...UNDER AWIPS HEADER NFDHSFAT1 AND WMO HEADER FZNT01 KWBC.

$$
FORECASTER ZELINSKY

If you were born in the Year of Rat or Mouse (1912, 1924, 1936, 1948, 1960, 1972, 1984, 1996) as per Chinese Astrology, know how you will fare in 2006 in your Career/Business, Health, Wealth, Harmony and Love. Be aware of your strengths and be warned of the negative energy that you may have to face, to plan your strategies well ahead. Get to know the Fengshui Enhancers and Cures that can help you, too.

If you were born in the Year of Ox or Buffalo or Bull or Cow (1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997) as per Chinese Astrology, know how you will fare in 2006 in your Career/Business, Health, Wealth, Harmony and Love. Be aware of your strengths and be warned of the negative energy that you may have to face, to plan your strategies well ahead. Get to know the Fengshui Enhancers and Cures that can help you, too.