Focusing on the importance of trading in the New York session yesterday, the United States (US) published inflation data had an impact on market movements.
The US consumer price index (CPI) for August met the forecast to decrease to 2.5% from the previous level of 2.9% for the annual reading, while the monthly CPI reading remained at the level of 0.2% as expected.
However, the core inflation reading increased to 0.3% compared to forecasts to remain at 0.2%.
Although US inflation is showing a decline, the US dollar did not show a negative reaction, instead the king of the currency strengthened after the data was published.
The market now expects the interest rate cut by the Federal Reserve (Fed) to be implemented as much as 25 basis points with the expected percentage increasing to 85% based on the CME FedWatch indicator.
Expectations of an aggressive cut of up to 50 basis points further decreased to 15%.
Analysts expect the Fed to cut interest rates at its September meeting next week, but Chairman Jerome Powell's upcoming speech is likely to be hawkish.
This follows the previous US economic growth report for the second quarter showing an increased figure and the NFP employment report for August was good.
Investors need to remember that the US inflation rate, although showing a downward trend, is still above the central bank's target level of 2%.
Thus, analysts do not rule out the possibility that the Fed will maintain the existing monetary policy before being more confident to implement policy easing.
The focus of today's trading is on the US producer inflation (PPI) data as well as the results of the European central bank (ECB) policy meeting which is expected to implement an aggressive interest rate cut of up to 60 basis points.
