Inflation back on the menu in Europe today

But the key focus in markets today is of course the FOMC meeting decision. Will it be a 25 bps or 50 bps rate cut? That is the question.

As things stand, traders are still pricing in ~65% odds of a 50 bps rate cut for today. And therein lies the balance of risks ahead of the Fed policy decision.

The US retail sales yesterday helped to see the dollar recover back some ground alongside yields. However, it may end up being just a tentative response on the week. Will the Fed stay true to their communication since Jackson Hole and go with 25 bps? Or will they feel more comfortable in seeking a bit of insurance with a 50 bps move?

USD/JPY has already retraced a chunk of its overnight gains, being pushed back down to 141.30 levels currently. That’s the main mover so far today while other dollar pairs are holding more tentative awaiting the Fed.

Looking to European trading, inflation is back on the menu for the UK and Eurozone.

The former will offer some intrigue before the BOE decision tomorrow but at the balance, it should be a non-factor. Headline annual inflation in the UK is expected to remain at 2.2% while core annual inflation is expected to tick up to 3.5%. As such, that would see market expectations for the BOE to stay on hold tomorrow be vindicated.

As for the euro area figures, these will be the final readings for August so they won’t matter too much. The ECB has already signaled that they will be on pause in October anyway.

0600 GMT – UK August CPI figures0900 GMT – Eurozone August final CPI figures1100 GMT – US MBA mortgage applications w.e. 13 September

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

This article was written by Justin Low at www.forexlive.com.