Trading US CPI on a high frequency basis
In this paper, we examine ways of trading US CPI on a high frequency basis. We show that knowing the surprise of headline or core CPI yields similar results from a high frequency trading perspective, despite the market focus on core, if we were to have hindsight of each measure. We examine the returns of various US CPI trading strategies over different intraday windows to understand the optimal window for trading US CPI on a short term basis using Turnleaf Analytics nowcasts for US CPI YoY NSA as an input. We combine multiple trading rules to create a portfolio of macro assets which has risk adjusted returns of 1.13 and annualised returns of 1.9% trading around US CPI in a historical sample since 2018.