US Inflation Data Dampens Fed Rate Hike Expectations
Softer-than-expected US inflation data has led to a decrease in market expectations for a Federal Reserve interest rate hike in September. While gold prices pulled back from a recent multi-month high, the prospect of a more accommodative Fed policy was noted as strengthening the outlook for silver. The US Dollar Index stalled its advance as traders reassessed the central bank's likely path forward.
US Dollar Weakens Against Major Currencies
Following the release of the latest US Consumer Price Index (CPI) report, the US Dollar broadly softened against a basket of major currencies. The Euro and the British Pound both registered gains against the dollar, while the commodity-linked Canadian Dollar held steady as the weaker greenback offset the impact of falling oil prices. The Dollar's modest strength during the Asian session did exert some pressure on currency pairs like GBP/USD.
Global Central Banks Show Divergent Policy Paths
Monetary policy outlooks varied across other major economies, contrasting with the easing rate-hike bets in the US. In Australia, a central bank official stated that interest rate risks are skewed to the upside and that past hikes are working as intended. Meanwhile, persistently hot wholesale inflation in Japan has bolstered the odds of a Bank of Japan rate increase, while in New Zealand, a survey showed that inflation expectations have cooled.
Sources