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Fed rate decision: Half or quarter cut
The Federal Reserve faces a decision between a half-point or quarter-point rate cut, marking the first cut in over four years
UK inflation met expectations, but lower-than-expected PPI adds complexity for the Bank of England
Gold consolidated near $2,570
WTI crude rallied to $70.85
Fed Meeting
Today’s financial landscape is shaped by multiple events, notably the Federal Reserve’s upcoming decision on interest rates. Investors are weighing whether the Fed will opt for a more significant half-point cut or a cautious quarter-point reduction. This is the first rate cut in over four years, occurring just weeks before the US presidential election, following months of historically high rates since July 2023. With inflation easing, some Fed officials have leaned toward rate cuts to mitigate potential damage from high borrowing costs. However, the speed and extent of easing remain in question. A half-point cut could stabilize the labor market but may also signal excessive concern over the economy's strength. Investors are monitoring other key economic indicators, including the UK and Eurozone inflation data, as well as speeches from ECB officials.
UK Economic Data
In the UK, inflation figures for August matched expectations, with the Consumer Price Index (CPI) at 2.2% year-on-year. However, Producer Price Index (PPI) output prices were lower than expected, with a 0.2% year-on-year increase versus the anticipated 0.5%. Input prices showed a similar trend, with a 1.2% year-on-year decrease, ahead of the Bank of England’s upcoming meeting.
Currencies
The British pound strengthened against the US dollar as markets priced in the potential for two rate cuts later this year, with the first sign of policy softening possibly emerging in November.
The EUR/USD saw a modest rise of 0.05%
Commodities
While gold prices struggled to gain traction, consolidating around $2,570 per ounce. Despite reaching an all-time peak earlier in the week. Silver also encountered pressure, dropping to a new weekly low, with the $29.40 level acting as a key support zone.
Meanwhile, West Texas Intermediate (WTI) crude extended its rally to nearly $70.85 in early Wednesday trading. Expectations of Fed rate cuts, combined with oil supply disruptions, supported WTI prices, though concerns over China's demand outlook could limit gains in the near term.
