Fed Rate Hike Odds Slip as Softer Inflation Data Boosts Precious Metals

The global market experienced a mixed reaction to softer U.S. inflation data on Thursday. The Consumer Price Index (CPI) rose just 0.1% month-on-month in July, easing annual inflation to 3.4%. This led to reduced expectations for near-term monetary tightening by the Federal Reserve, with the probability of a 25-basis-point rate hike falling to around 40%.

Precious metals benefited from this development, staying near recent highs as investors scaled back bets on aggressive interest rate hikes. The market's attention now shifts to today's U.S. producer price data for further clues on underlying inflation and the Federal Reserve's policy outlook.

Crude oil prices also fell, snapping a five-session rally, after a larger-than-expected increase in U.S. inventories weighed on prices. The IEA projected a global oil supply shortfall of around 1.8 million barrels per day this quarter, highlighting the potential for tighter conditions if the Middle East conflict continues to disrupt regional energy flows.