If you fancy making a quick buck trading around tomorrow’s Australian consumer price inflation report, you better have lightening reflexes and know exactly what the implications are for interest rates.
If not, perhaps it’s time to sit this one out.
According to new research from ANZ Bank, around 70% of the total move in the Australian dollar tends to occur just five seconds following its release.
This chart shows the median market move in the Australian dollar to either an upside or downside figure in the CPI report going back to 2012.
“It is important to get the number right for the large gain, as the big chunk of the move happens immediately,” says ANZ.
“But there is still some time, for those who miss the number to profit of smaller moves.”
So while the Aussie, historically, has often continued to move in the same direction as the initial market reaction, for those who want to catch the bulk of the move, you have to be quick to pull the trigger on your trade.
Not quite “blink and you’ll miss it”, but close.
ANZ says the reason why most of the move tends to occur quickly is because of the increased prevalence of algorithmic trading.
“This is a structural change for the market and one that will both persist and continue to evolve,” says ANZ.
“Total gains have become smaller, reaction functions less reliable, and the persistence of price trends in the hours following the release of economic data has diminished.”
But that’s still unlikely to stop many human traders from chancing their skill and speed around the CPI release.
For those who are, it will arrive at 11.30am AEDT on Wednesday, January 31.