09/09/2024
Written by: Ian Morley
Summary:
The US dollar weakened yesterday after the latest US Producer Price Inflation Report revealed that price increases for July were below expectations. Notably, service costs saw their most significant drop since March 2023, and key components of the PCE, the Federal Reserve’s preferred inflation metric, showed a sharp decline.
This morning, the Office for National Statistics (ONS) released the UK’s July inflation report, which was slightly below expectations. Although both Headline and Core Inflation figures came in 0.1% lower than anticipated, the Headline inflation rate rose for the first time this year, registering an annual increase of 2.2%. This remains above the Bank of England’s 2% target, with wage growth, airfares, and energy bills contributing to the rise. Additionally, the Reserve Bank of New Zealand reduced interest rates from 5.5% to 5.25%. Markets are expected to stay within a range ahead of the release of US inflation data at 1:30 pm today.
Market Insight:
All eyes are on the upcoming US inflation data for July, scheduled for release at 1:30 pm today. The headline inflation rate is expected to be 2.9%, slightly below the previous reading by 0.1%.
The US dollar has been under pressure following the recent employment report, which has fuelled speculation about a potential 0.50% rate cut by the Federal Reserve at its September FOMC meeting. Currently, the markets are pricing in a total of 1% in interest rate cuts by the end of the year.