Markets on Edge as Inflation Data and Rate Hikes Loom
HDFC Treasury Desk notes that global markets will remain on edge this week due to several key drivers, including US inflation data, elevated crude prices, and shifting rate expectations.
The focus is on Thursday's producer price inflation (PPI) and Friday's consumer price inflation (CPI) data for clues on the Federal Reserve's policy path. Headline CPI is expected to rise 0.4% month-on-month in August, partly reflecting higher energy prices, while core inflation is expected to increase 0.2%.
A stronger-than-expected inflation reading could reinforce expectations of a September Fed rate hike and push the US dollar and Treasury yields higher. However, with other central banks also turning more hawkish and narrowing the US rate differential, 'the upside for the dollar could remain limited.'