The Consumer Price Index (CPI) report released yesterday was the last major economic data before next week's Fed meeting that gave a final reason for the central bank to cut rates, but in line with a moderate scenario.
Traders of interest rate futures are now pricing in a year-end rate of 4.25–4.50%, which implies a rate cut of half a percent at one of the Fed's last two meetings this year.
The US central bank is likely to start its long-awaited cycle of interest rate cuts next week with a quarter-percentage-point move as it seeks to reduce the likelihood of a recession, although persistent core price pressures keep officials from taking more aggressive steps.
Traders now estimate the odds of a half-percent rate cut at the Fed meeting on September 17–18 to be less than one in five. This is lower than before Wednesday's data release.
The data showed that the CPI rose by 2.5% year-on-year in August, while July's increase was 2.9%.
Excluding volatile food and energy costs, consumer prices rose by 3.2%, the same as the month before. Housing costs, whose growth has slowed in recent months, increased year-on-year for the first time since March 2023.
Last week's data indicated that the pace of hiring in the US had slowed in the past few months, but the drop in the unemployment rate to 4.2% in August gave some confidence that the labor market did not need the immediate support from the Fed.
As the policy easing will be more moderate than previously expected, this could put some downward pressure on EURUSD.
The overall recommendation is to sell EURUSD when the price hits the resistance level of 1.1075.
Profits from selling EURUSD should be taken at the level of 1.1015. A Stop loss could be set at the level of 1.1500.
The possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
