FX Market Update #04

For the week of September 2-7, here is a summary of market news that may help you gain clarity and make informed decisions in the foreign exchange market.

If there's a particular point that interests you or if something is missing from this newsletter, feel free to let me know by commenting on this article!

DXY - EUR/USD

Rate cut probabilities have not changed significantly, standing at 72.5% for a 25-basis point cut and 27.5% for a 50-basis point cut. The probability of a 50-basis point rate cut at the 8 November meeting is currently at 53%. The total rate cuts priced in for the last three meetings of the year amount to 109 basis points.

A 25-basis point rate cut is expected from the ECB this Thursday, setting its key interest rate at 3.5%. It would be extremely surprising if they left rates unchanged, especially considering the rate cut by the Fed is scheduled for the following week.

GBP/USD

Employment figures are expected to show a slight increase this Wednesday. The GDP growth for July will also be released on Wednesday, and the BOE will publish its inflation report this Friday. All these indicators will help us anticipate the BOE's decision expected next week. The pair took a breather last week and is trading at 1.3133 this Monday.

USD/CAD

The BOC lowered its key rate by 25 basis points as expected, marking its third cut this year.

USD/CNH

The Renminbi lost ground this Monday, trading at 7.1112 after inflation figures came in slightly below expectations. August's CPI (MoM) was reported at 0.4% compared to the 0.5% expected. The anticipated wave of dollar repatriation from exporting companies has yet to materialize and might never happen if China's economic situation does not improve. In other words, the Fed’s rate cut has taken a backseat to China’s economic outlook.

Key Events to Watch This Week:

1. German CPI MoM (Aug) - Tuesday 2 pm HKT
2. UK GDP MoM (Jul) - Wednesday 2 pm HKT
3. US CPI MoM (Aug) - Wednesday 8:30 pm HKT
4. Key ECB rate Monetary Decision - Thursday 8:15 pm HKT