The hype surrounding the Fed reaches a higher gear today as the much awaited September meeting gets underway ahead of the announcement of their decision on interest rates tomorrow. Yesterday’s revision higher of July’s retail sales gave the dollar a boost, with Treasury yields spiking as the remaining few market participants that are expecting a rate hike tomorrow clutched to their view. But before the Fed shows its hand tomorrow we see US CPI data today which could move the dollar. Y on Y inflation is expected to remain steady at 0.2% and even increase if you strip out food and energy from 1.8% to 1.9%, which is likely to be dollar supportive if it exceeds expectations, but a lower figure could see yesterday’s gains in Treasury yields unwind as we’re already seeing this morning. Either way the data is unlikely to be a game changer as the overall US inflation picture does not cry out for higher interest rates. European equities are also expected to open a higher this morning as investors increasingly see the Fed keeping rates on hold tomorrow.
Also today inflation figures from the Eurozone are released with the Y on Y headline expected to remain unchanged at 0.2%, but this morning the focus will be on sterling with the release of UK unemployment data. The labour market has been showing signs that its best days are over following impressive job creation in the run up to May’s General Election, but for the Bank of England the key figure is the average earnings which are expected to increase and could be sterling supportive.