Global markets hold their breath for US CPI data

All attention in global markets turned to the consumer price index data to be released in the US. After the latest producer inflation data released in the US strengthened expectations that the Fed may cut interest rates in September, Wall Street indexes rose and bond yields fell. Following the moderate PPI data, swap traders priced in a Fed rate cut of approximately 40 basis points in September and a total rate cut of more than 100 basis points for 2024. The S&P 500 rose 1.7 percent, led by the stocks of the world's largest technology companies. Treasury bonds rose along the curve, along with the movement in shorter maturities. The yield on US 10-year bonds fell 6 basis points to 3.84 percent. The Bloomberg Dollar Index saw its lowest level since April. Brent crude oil paused its five-day rise due to tensions in the Middle East and fell 2 percent yesterday. Asian stock markets are mixed this morning. The MSCI Asia Pacific Index is rising for the fourth consecutive trading day. The rise was driven by increases of over 1 percent in New Zealand and Taiwanese stock markets. Japanese stocks and the yen fluctuated due to political uncertainty. US consumer inflation data to be released US consumer inflation data for July will be released today at 15:30 GMT. Consumer inflation is expected to remain at the 3 percent annual level announced in June in July, while core CPI growth is expected to slow from 3.3 percent to 3.2 percent. “Bloomberg Economics expects July CPI to be soft due to the long-awaited slowdown in housing rents, falling second-hand vehicle prices and discounts in discretionary services categories as consumers rein in their spending,” said Anna Wong, Bloomberg’s US Chief Economist. “The results for the Fed’s preferred inflation gauge, the core PCE deflator, are likely to be more mixed,” Wong said. “If our forecast is correct, the CPI data — along with the encouragingly soft PPI data for July — would imply that the core PCE deflator accelerated year-over-year in July.” “In our view, this will not prevent the FOMC from cutting rates by 50 basis points at its September meeting. The Fed will increasingly focus on the employment leg of its dual mandate this fall amid a rising unemployment rate that we expect to reach 4.5% in October,” Wong said.