• Inflation expected to rise again in the latter part of this year – ECB accounts
• China imposes sanctions on three US military firms on Taiwan arms sales
• New Whales Drop $100B on BTC, is It Time for New Rally?
• BOJ’s Himino: We have enough time to carefully monitor financial markets
• Weekly update on interest rate expectations
• BOJ’s Himino: We will hike rates if outlook for economy, prices in July report is achieved
• European equities in a mixed mood to start the day
• What is the distribution of forecasts for the US CPI?
• EUR/USD sits on the edge as sellers eye further downside
• What are the main events for today?
• Eurostoxx futures -0.2% in early European trading
• Germany August retail sales +1.6% vs +0.1% m/m expected
• FX option expiries for 10 October 10am New York cut
• Japan households still largely expecting prices to be higher a year from now – BOJ survey
• US inflation the main event in the day ahead

The European session was empty in terms of data releases. Everyone is waiting for the US CPI release due in an hour. In the markets, we’ve been seeing some hawkish moves into the CPI with Treasury yields and the USD adding to the prior gains.

There’s clearly some fear that we could get an upside surprise, therefore some hedging into such a key report ahead of the Fed decision in November is what you would expect.

Heading into the release, the market is pricing 43 bps of easing by year end with 20% probability of a pause in November. For 2025 the market sees an additional 90 bps of easing by year end. These expectations are a little more hawkish compared to the latest Fed’s projections.

Below you can find the range of estimates and the distribution of forecasts for the US CPI report:

• Range of estimates
• Distribution of forecasts

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• But inflation is then expected to decline towards target over the second half of next year
• Too early to declare victory against inflation
• Core inflation and services inflation might be stickier and not decline as much as expected
• But disinflationary process remains on track
• The risk of delays in reaching the target warrants some caution against dialing back policy restriction prematurely
• Need to carefully monitor whether inflation would settle sustainably at target in a timely manner
• Full accounts

There’s nothing in there that is out of the ordinary. The thing is that since last month’s meeting, recent data has pushed markets to expect another rate cut by the ECB for next week. That is the bigger development in play currently. A 25 bps rate cut is now ~94% priced in based on the rates market.

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