Markets Likely to Stay Rangebound as Traders Await US CPI Report and Middle East Developments
Key Takeaways
- •Markets are expected to trade in a range as participants await Wednesday's US CPI report, seen as pivotal for the Federal Reserve's September rate decision.
- •The probability of a September rate hike declined to 48% from 54% following the latest US Non-Farm Payrolls report.
- •The headline NFP figure was weakened by a significant drop in government employment, but the overall labor market remains on a stronger trajectory compared to the past three years.
- •The Eurozone Sentix investor confidence index is forecast at -0.5, an improvement from the prior month's -3.1, though it is unlikely to influence ECB policy expectations.
- •Geopolitical tensions in the Middle East remain elevated and are being closely watched for potential effects on energy markets and investor risk sentiment.
The trading agenda for today is light, with price action expected to remain rangebound as market participants await Wednesday's US CPI report and watch for further developments in the Middle East, where elevated geopolitical tensions have kept investors attuned to any signals that could affect energy markets and risk sentiment.
European Session
The Eurozone Sentix investor confidence index is the only notable release on the European calendar. The index is expected to come in at -0.5, compared to -3.1 in the prior month. This release has historically not been a market-moving data point and is unlikely to alter the European Central Bank's policy outlook, even as the ECB continues to assess whether its tightening cycle has peaked.
Price action during the European session is likely to remain rangebound, with traders positioning ahead of the US CPI report and monitoring geopolitical developments in the Middle East.
American Session
There are no major economic releases scheduled for the American session. Markets continue to digest the latest US Non-Farm Payrolls (NFP) report, which lowered the probability of a September rate hike to 48%, down from 54% prior to the data release.
While the headline NFP figure appeared soft, the underlying data was not as weak as suggested, as the headline number was distorted by a significant drop in government employment. Overall, the labour market remains on a better trajectory compared to the past three years.
The US CPI report scheduled for release on Wednesday is widely expected to be the decisive factor in determining whether a September rate hike materializes, as the Federal Reserve has emphasised inflation data as the primary input for its remaining policy decisions this year.
