Fed Uncertainty Lingers as Markets Price in September Hike

The Federal Reserve's September meeting remains uncertain, despite yesterday's PCE print coming in line with expectations. Core PCE rose 0.2% month-on-month and 3.3% year-over-year, while headline PCE increased to 3.7%. The growth side of the report was softer, with real personal spending unchanged in July and households opting to save rather than spend.

Markets are still hawkish, pricing a roughly 50% chance of a hike by decision day. This could increase the likelihood of a hike, as the Committee may be reluctant to risk triggering bond market volatility. Tomorrow's speech at Jackson Hole by Kevin Warsh remains pivotal for FX markets.

The US dollar (USD) may find support above 99.0 into the speech despite upbeat risk sentiment following strong Nvidia results. Meanwhile, CAD and AUD are on different trajectories, with the Canadian dollar expected to fall further due to ongoing trade tensions between the US and Canada.