It’s a huge day today for the financial sector! On Tuesday, we get the U.S. Consumer Price Index (CPI) and analysts are forecasting inflation figures to be climbing. Analysts predict the headline CPI to jump to 2.9%, from 2.7%, which would be the largest increase since February. Core CPI is expected to peak at 3.1%. As luck would have it, the European Central Bank (ECB) is meeting today. This means that economists are almost unanimous that the ECB will stay put and refrain from any immediate action.
According to the CME FedWatch tool, there’s a 70.8% chance of at least two rate cuts after the Federal Reserve’s October meeting. The very market moving expectation of today’s CPI figures is central to the unfolding market narrative ahead of these expected cuts. A print that indicates continued weak inflation would certainly solidify the case for at least two cuts. Conversely, a hotter-than-expected CPI could shave those hopes to a single reduction.
Now, as the global financial community eagerly awaits the results, some analysts are raising alarm over the drastic implications for the U.S. dollar. According to reports, “If the Fed pulls the rate cut trigger next week, as expected, it will be doing so with inflation around 3% – a percentage point above the central bank’s 2% target.” This environment risks pushing for even more easing in the face of continuing inflation. Analysts like it as another move to help narrow the gap between the U.S.’s inflation-adjusted interest rates and those in other developed markets, which they view as toxic for the dollar.
A soft CPI report could prompt a significant decline in the dollar’s value, especially if it supports expectations of substantial rate cuts. What the market is most focused on is how consumers are reacting to prices in these uncertain economic times.
Fitch Ratings will be the first major rating agency to issue its opinion on France’s creditworthiness with an announcement scheduled for tomorrow. This just as U.S. economic indicators turn heads. Negatively rated AA- Currently rated AA- with a negative outlook, France’s high debt levels have led to questions about the country’s financial safety. Insights from this announcement may ripple across European markets, particularly in relation to policy direction by the ECB on future monetary policy.
“The main effect will be on the 50 basis points question for September or 25 in September and 25 in October,” an economic analyst noted. These upcoming decisions will not just be a test of France’s economic vitality, but a barometer of what is happening all over Europe.
Yet political pressures are mounting in the U.S. and Europe. In Utah, the recent assassination of a prominent Trump influencer has attracted huge public attention and quickly dominated local news cycles. As we witnessed in this tragic event, political engagement is vital, echoing the frustrations voiced about democracy in France’s recent turmoil.
“We may not appreciate the violence, but you must admit the commitment to being heard is impressive.” – The Rockefeller Morning Briefing
This quote underscores a belief that public participation remains a cornerstone of democracy, a notion echoed in assessments of French civic engagement:
“As we thought all the way back to 1968, we say this degree of public participation in political affairs highlights the success of French democracy.” – The Rockefeller Morning Briefing
The reality is that the U.S. is in a deep deficit and in the midst of long-term economic strife. All this is happening as foreign investors are beginning to signal a turn against U.S. assets. So far, hard data undergirding this trend has been difficult to find.