Crucial US Inflation Data on Tap Ahead of Fed Meeting.
With last week's central bank and employment data now absorbed by the market, investor focus sharpens this week on a critical inflation report from the United States. The European Central Bank's decision to hold interest rates and a steady US jobs report have solidified the view that the Federal Reserve will be the next major central bank to cut rates. This week's US Consumer Price Index will be the final key data point before the Fed's highly anticipated policy meeting next week.
The Pound Sterling's direction will be guided by domestic data this week, with the release of the latest UK labour market and monthly GDP figures. The strength of the UK economy and the persistence of wage growth remain key variables for the Bank of England. The data will be closely watched for any signs that could alter the outlook for UK monetary policy heading into the autumn.
The US Dollar remains under a soft bias as the market continues to price in a rate cut from the Federal Reserve this month. The currency traded in a relatively stable range last week, and its next significant move will almost certainly be dictated by Thursday's CPI inflation report. A softer-than-expected reading would cement expectations for a cut and weigh on the Dollar, while a high number could introduce significant two-way volatility.
The Euro found support last week from a more cautious European Central Bank, which opted to pause its rate-cutting cycle to assess incoming data. This "hawkish hold" has provided a degree of stability for the single currency. With the regional calendar relatively light this week, the Euro's performance will likely be tied to the outcome of the US inflation data and its broader impact on the US Dollar.
Events to Watch This Week:
⦁ Tuesday, September 9: UK Labour Market Report
⦁ Thursday, September 11: US CPI Inflation Report
⦁ Friday, September 12: UK Monthly GDP & US Producer Price Index
This week serves as the final and most important data prelude to the Federal Reserve's upcoming policy decision. The US inflation report on Thursday is the undisputed main event and carries the potential to either validate the market's dovish expectations or force a dramatic last-minute repricing, setting the stage for a volatile period ahead.
