Key CPI Reports and Fed Rate Cut in Focus

Discover how upcoming U.S. Fed rate cut announcements, Euro Area CPI data, and other key events might impact today’s currencies, gold, and oil markets. Stay ahead with detailed analyses of the dollar index, Euro, British Pound, and more.

Asia Session Overview:

During the Asian trading hours, the U.S. dollar index (DXY) remained steady at around 100.80. Market participants will adopt a cautious approach ahead of significant events later today. Federal Reserve Chairman Jerome Powell will speak, and the release of inflation data for the Euro Area and the U.K. could increase volatility in their respective currencies.

Europe & U.S. Sessions Outlook:

1. Euro Area: Also, there is anticipation that August’s final Consumer Price Index (CPI) reading will show a slight decline in headline CPI to 2.2% year-over-year (YoY) and that core CPI will ease to 2.8% YoY. “Over the past year, inflationary pressures in the Euro Area have significantly reduced, and further cooling in prices could temper the Euro’s recent gains.
2. United Kingdom: Inflation in the U.K. has decreased notably in 2024, with headline and core CPI slowing to 2.2% and 3.3% YoY, respectively, as of July. So, For August, expectations are for headline CPI to remain unchanged at 2.2%, suggesting that progress toward the Bank of England’s target of 2% has paused. Should inflationary pressures rise unexpectedly, it may boost the British Pound before the European trading session commences.

Key News Events Today:

• FOMC Statement: 6:00 pm GMT
• FOMC Press Conference: 6:30 pm GMT

Dollar Index (DXY) Forecast:

The Federal Reserve is preparing for its first interest rate cut since July 2019, with market estimates pointing to a 25-basis-point (bps) reduction. However, per the CME FedWatch, there is a significant probability of a 50-basis-point Cut. The market remains divided on the scale of the cut, and traders should brace for heightened volatility as the Fed’s statement and Chair Jerome Powell’s press conference approach.

Key CPI Reports and Fed Rate Cut in Focus

Gold (XAU) Outlook:

Given the Federal Reserve’s anticipated rate cut, expect fluctuations in gold prices. The market is debating whether the Fed will implement a 25 bps or 50 bps reduction, which could potentially create essential volatility for gold prices as the announcement and Powell’s press conference unfold.

Australian Dollar (AUD):

The Aussie dollar maintained strength despite recent U.S. sales data. Trading around 0.6770 in Asian markets, the AUD faces support at 0.6650 and resistance at 0.6800. With no major news events today, the currency’s movements will likely reflect broader market sentiments.

New Zealand Dollar (NZD):

The Kiwi dollar showed resilience, trading near 0.6200 after briefly surpassing it. Consequently, with support at 0.6120 and resistance at 0.6235, the NZD will exhibit medium bullish tendencies, supported by a recent reduction in the Official Cash Rate (OCR) and inflation convergence towards the target range.

Japanese Yen (JPY):

The USD/JPY pair saw upward movement due to increased demand for the dollar, nearing 142.50 before retreating slightly. With support at 139.80 and resistance at 143.70, the JPY may trend weakly bearish today, influenced by ongoing economic conditions and the upcoming BoJ meeting.

Euro (EUR):

The Euro is likely to see moderate bullish movement following the CPI release. With the final CPI for August expected to show a reduction in inflationary pressures, the Euro may face limited gains in the short term. Recent ECB decisions to lower key interest rates also contribute to this outlook.

Swiss Franc (CHF):

The Swiss Franc saw a brief peak against the dollar but has since retreated. However, with support at 0.8400 and resistance at 0.8500, the CHF will likely trend weakly bearish today, reflecting broader market conditions and recent SNB policy adjustments.

Pound Sterling (GBP):

Due to the CPI data release, the GBP may experience a weak bullish bias. With August’s headline CPI expected to remain at 2.2%, the currency could be sensitive to any unexpected inflationary pressures, potentially influencing the GBP’s performance before the European trading session.

Canadian Dollar (CAD):

The Loonie’s demand has softened, with USD/CAD hovering around 1.3580. With support at 1.3500 and resistance at 1.3630, Recent economic data and upcoming Bank of Canada meetings will likely push the CAD towards weak bearish tendencies.

Oil:

After declining for three weeks, crude oil prices temporarily rose due to geopolitical tensions in the Middle East. WTI crude oil prices reached nearly $72 per barrel but have fallen below $70. Volatility in oil prices is likely to persist, driven by ongoing inventory reports and geopolitical factors.

Next 24 Hours Bias:

• DXY: Weak Bearish
• Gold: Weak Bullish
• AUD: Medium Bullish
• NZD: Medium Bullish
• JPY: Weak Bearish
• EUR: Medium Bullish
• CHF: Weak Bearish
• GBP: Weak Bullish
• CAD: Weak Bearish
• Oil: Weak Bullish

As markets await crucial economic data and central bank decisions, expect heightened volatility across currencies and commodities.

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