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The U.S. dollar rebounded to a certain extent as yields stabilise. The market is turning its attention toward the upcoming U.S. inflation data, which will provide insights into the Federal Reserve’s interest rate decision at its September meeting.
Despite recent jobs showing weaker employment growth, a lower unemployment rate have added some uncertainty about whether the Fed will cut rates by 25 or 50 basis points.
Market expectations point toward a higher probability for a 25 basis point cut although a larger cut remains on the table.
The market is also keeping an eye on U.S. Treasury yields, with the 10-year note yield ticking up to 3.75%. Both the dollar and Treasury yields are expected to respond to any new developments in inflation trends and Fed policy expectation changes and could see higher volatility.
While the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) are key data this week, the markets will also focus on the Trump and Kamala debate. Moreover, the consumer sentiment report, due on Friday, is also expected to show a modest improvement.
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