PPI Shifts Fed Outlook; Trump–Zelenskyy Talks Loom
EUR/USD Tests 1.1700 Again. All Eyes on Powell at Jackson Hole
U.S. inflation is again garnering all the attention as the sweeping tariffs imposed by the Trump administration on several countries are starting to show their effects. Although the U.S. Consumer Price Index (CPI) released last week was mostly in line with expectations, the Producer Price Index (PPI) far exceeded the forecast of 0.2%, coming out at 0.9% for both the headline and Core figures.
The PPI is a measure of inflation at producer levels and affects consumer prices because if the producers charge more for their goods and services, the higher prices will eventually be passed on to the consumers.
Before the PPI release, the CME FedWatch tool was showing a 95.8% probability of a 25-bps cut, and the rest of 4.2% was reserved for a 50-bps cut. Now the probability has shifted, with a 92% chance of a 24-bps cut and an 8% probability of a no-cut scenario. There is no longer a chance that the Fed will make a half-point cut.
Over the weekend, President Trump met with President Putin, but the details of the meeting remained mostly undisclosed. According to the Trump administration, the meeting went well, but that’s about all they revealed. On Monday, President Trump is set to meet with President Zelenskyy to discuss a possible agreement to end the Russia – Ukraine war.
Economic Calendar Highlights
The Trump – Zelenskyy meeting is scheduled for Monday. Expect strong reactions on the chart as soon as any details of the talks transpire.
Wednesday at 6:00 pm GMT, the FOMC will release the Meeting Minutes, offering details about the latest rate vote but also probable hints regarding the next cut(s).
Thursday will be filled with Purchasing Managers’ Index releases, starting early at 7:30 am GMT with the German Manufacturing and Services PMIs, and followed by the same indicators for the UK economy at 8:30 am GMT. The U.S. PMIs will be released at 1:45 pm GMT. Also Thursday, the Jackson Hole Symposium will begin, hosting the most prominent central bankers and leading financial personalities from across the world.
Fed Chair Powell will speak on Friday at 2:00 pm GMT at the Jackson Hole Economic Policy Symposium. This is considered an event with a very high impact, mainly because we may get more clarity on monetary policy going forward.
Technical Outlook – EUR/USD
The pair is currently attempting to break the 1.1700 resistance after testing the level for three consecutive days. A daily close above this level will probably send the price into the upper Bollinger Band, which would match the top reached in early July, at 1.1830.
If the bulls fail to conquer the resistance at 1.1700 and the bearish trend line drawn from the July high, it will become clearer that the uptrend is severely weakened.
The peace negotiations will play a major role this week, and the meeting between Trump and Zelenskyy can heavily impact the markets.
