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Will PCE inflation disappoint dovish expectations? The Fed’s long-anticipated dovish pivot is upon us and markets are bracing for the first US rate cut of this cycle at the September 17-18 meeting.
Focus to stay on the Fed as PCE inflation to be week’s main highlight. Eurozone inflation data to be crucial for ECB rate cut hopes. Australian and Tokyo CPI , plus Canadian GDP also on the agenda. However, the Fed remains largely data dependent and with the September decision also containing the updated dot plot, the rate path is far from being set in stone.
The Eurozone’s headline inflation rate is forecast to moderate from 2.6% y/y in July to 2.3% in August, bringing it much closer to the ECB’s 2% goal. The core rate that excludes all volatile items is expected to tick down slightly to 2.8% y/y. Any disappointment in the inflation readings could boost the euro further versus the greenback, although it’s unlikely to change the market consensus for a September cut.
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