The focus in today’s market is primarily on the U.S. Consumer Price Index (CPI) release. Market expectations are for a slight deceleration in year-on-year inflation, with a consensus of +3.1% compared to the previous +3.2%. The core year-on-year inflation is expected to remain at +4.0%, showing a continued trend of moderate inflation. While there is a trend of slowing inflation, core inflation at 4% remains at a relatively high level. The initial response in the dollar market is likely to be influenced by the strength or weakness compared to these pre-announced forecasts.
This week, the results of the last Federal Open Market Committee (FOMC) meeting of the year will be announced in December 14th. While the market consensus is for the Federal Funds Rate to remain unchanged, all eyes will be on Chairman Powell’s press conference to see if there will be any changes in the hawkish stance seen thus far.
Currently, the market is dominated by expectations of a rate cut in the United States starting from May next year. For the whole of 2024, more than 100 basis points of rate cuts have been priced in. It’s worth noting that financial authorities may express caution regarding the market’s forward-looking expectations.
First, we need to see how the market’s expectations for rate cuts evolve in response to today’s U.S. Consumer Price Index release.
In addition to the U.S. Consumer Price Index mentioned above, there are other economic indicators scheduled to be released in the international markets today, including the UK Employment Statistics (November), UK ILO Employment Statistics (August-October), Germany’s ZEW Economic Sentiment Index (December), and South Africa’s Manufacturing Production (October). Pay close attention to wage trends in the UK and the economic sentiment in Germany.
In terms of speaking events, a speech by François Villeroy de Galhau, Governor of the Bank of France, and the U.S. 30-Year Bond Auction ($21 billion) are among the notable events.
Today, the main focus is on the release of the U.S. Consumer Price Index, and we will be closely monitoring the market’s reaction and any potential shifts in USD sentiment.