Can Inflation Shift the Fed’s Rate Path?

8 thg 9

This week’s inflation data could be decisive for traders as markets weigh whether the Fed will cut rates by 25 or 50 basis points. Last week’s jobs report did not sway the market from its current consensus.

The US economy added 142,000 jobs in August 2024, falling short of the expected 160,000, based on the latest NFP data. According to the CME FedWatch Tool, the likelihood of a 25-bps rate cut climbed to 73%, while expectations for a 50-bps cut dropped to 27%.

Attention now turns to inflation, with consumer prices expected to fall to 2.6%—the lowest since March 2021—and producer prices anticipated to rise 0.2% month-over-month.

Key USD pairs to watch this week include EUR/USD, with the ECB's upcoming interest rate decision in focus. Additionally, pairs impacted by inflation data releases from Mexico, Brazil, Russia, and India could see significant movement.