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Posted September 10, 2025 at 12:47 pm
I believe expectations for tomorrow’s Consumer Price Index are too elevated in light of subdued energy costs, sluggish housing valuations, soft rents and a lack of tariff-fueled cost pressures. My estimates for this Thursday’s print are at 2.8% for headline and 3% for core, below the medians of 2.9% and 3.1%. Against this backdrop I find the risk-reward dynamics of buying the “Nos” at the thresholds that would meet consensus projections as well as those above attractive. For headline, the “Nos” at 2.9% and 3% are going for $0.78 and $0.96, while for core, the “Nos” at 3.1%, 3.2% and 3.3% are costing $0.74, $0.90 and $0.97. Additionally, there’s some low hanging fruit corresponding to “Yes” contracts for both indicators. The “Yeses” for the headline ranging from the 2% to 2.6% levels are between $0.94 and $0.98 while the 2.3% and 2.4% core thresholds are each at $0.97 and also appear to be in the safe zone from my perspective.
In light of volatile initial unemployment claims lately amidst a higher bias, I’m avoiding the 230k and 240k thresholds for this trade idea and am finding the risk-reward profiles of the “Yeses” at 210k and 220k alongside the “No” at 250k attractive. The thresholds are going for $0.97, $0.94 and $0.96. This indicator has been trending north recently against the backdrop of labor market softening but has only exceeded 250k once in 25 months.
Our prediction market participants are expecting a pause from the European Central Bank (ECB) tomorrow with a high degree of confidence quantified by the “Yes” contract costing $0.96. The pricing of these instruments corresponds to the percentage probability of the “Yes” or “No” being true at the settlement date.
Source for Images: ForecastEx
Note: Prices are highest bids as of the morning of September 10, 2025. Red circles around the thresholds were inserted by J. Torres to highlight his preferred “Yes and No” answers throughout different levels.
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This material is from IBKR Macroeconomics, an affiliate of Interactive Brokers LLC, and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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