U.S. CPI for August, due on Tuesday, will be closely watched for how aggressively the Federal Reserve may need to raise interest rates this week to combat high inflation. The Fed’s policymaking arm is expected to raise its benchmark overnight lending rate again from its current range of 2.25%-2.50% at its Sept. 20-21 meeting.
According to CME’s “Federal Reserve Watch”: The probability of the Fed raising interest rates by 50 basis points by September is 8%, and the probability of raising interest rates by 75 basis points is 90%; by November, the probability of raising interest rates by 75 basis points is 6.3%. The probability of raising interest rates by 100 basis points is 73.8%, and the probability of accumulative rate hikes of 125 basis points is 20%.
The U.S. dollar index has been strengthening on expectations of aggressive Fed action, hitting a 20-year peak of 110.79 on Wednesday, but has since retreated. On Monday, the U.S. dollar index closed down 0.62 percent at 108.30, after hitting 107.81, its lowest since Aug. 26.
Gold stabilized and rose near 1712 yesterday. At night, the highest 1735 line was blocked and fell. In early trading, we paid attention to the reaction near 1723. We waited for more near 1717 or yesterday’s low, and the top was close to yesterday’s high or near 1742.