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GBP/USD approaches 1.3900 for the first time in a year. US PPI producer-level inflation rose faster than expected in June. Despite inflation risks, markets have pinned hopes on a September rate cut. GBP/USD wrapped up Friday on the high side of a two-week rally as the US Dollar broadly buckles under the weight of investors dog-piling into hopes of getting a rate cut from the Federal Reserve (Fed) in September. Markets are shrugging off an unexpected uptick in Producer Price Index (PPI) wholesale inflation, which accelerated faster than expected in June and could put pressure on key Fed inflation metrics looking forward. Forecasting the Coming Week: Fed rate cut bets and the ECB should rule the sentiment In June, the core Producer Price Index (PPI) for wholesale inflation in the US accelerated to 3.0% year-over-year, exceeding the expected 2.5%. Additionally, the previous period’s figure was revised upward to 2.6% from the initial 2.3%. Despite the significant increase in producer-level inflation, the market’s attention has turned to the decrease in Consumer Price Index (CPI) inflation earlier in the week, leading to heightened expectations of a rate cut. According to the CME’s FedWatch tool, there is a significant probability of a quarter-point rate cut at the Federal Open Market Committee’s (FOMC) meeting on September 18. Rate traders are also currently pricing in at least three rate cuts in total for 2024, which is more than the one or two cuts projected by the Fed by December. Economic Indicator Producer Price Index ex Food & Energy (YoY) The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and…

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Filed under: News - @ July 13, 2024 7:10 pm