In anticipation of tomorrow’s release of the US Consumer Price Index for August, the market is facing uncertainty today. This CPI report is of particular interest for future actions by US monetary authorities in the autumn. The prevailing market consensus ahead of the September FOMC meeting leans heavily toward no change in policy rates. According to the latest CME FedWatch, 93% of the market expects rates to remain unchanged, with only 7% factoring in a 25-basis point rate hike.
Expectations for this month’s US Consumer Price Index suggest that headline inflation is likely to rise once again. Month-on-month, it is expected to increase from +0.2% to +0.6%, while year-on-year it is expected to rise from +3.2% to +3.6%. Conversely, core inflation is expected to remain flat at +0.2% month-on-month, with year-on-year growth slowing from +4.7% to +4.3%. With mixed expectations, the market’s outlook for the September FOMC meeting is unlikely to change.
However, if the actual results align consistently with these expectations, it could influence future market sentiment.
Given the uncertainty and potential for adjustment ahead of tomorrow’s US CPI release, maintaining the USDJPY short position is prudent.