Expected vs actual

Summary

Markets move on surprises. If inflation comes in at 3% when 3% was expected, there may be little reaction even though the number is high. If it comes in at 3.4% against 3%, the surprise moves prices. Compare the actual number with the forecast, not with what you think is good or bad. The first move after a release is often fast and can reverse.

Key points

• The gap between actual and forecast drives the move.
• A high number that was expected may barely move prices.
• The first reaction is fast and can reverse.

Check yourself

Inflation comes in exactly as forecast. What usually happens?

Practice