US Dollar softer after Harris wins debate while markets are on edge of US CPI

LONDON (September 11) The US Dollar (USD) eases a touch on Wednesday, with several news correspondents commenting that Vice President Kamala Harris has won the presidential election debate between her and former US President Donald Trump. The victory is a very small one though, not a landslide at all. Expectations are that Kamala Harris will now gain some points in the polls, though it will still remain a close call towards the November 5 elections. 

On the economic data front, the US Consumer Price Index (CPI) release for August will focus all the attention for this week. Markets see this as the last data point for the US Federal Reserve (Fed) and its Federal Open Market Committee (FOMC) to make their interest rate decision next week. A softer CPI release would open the door for a 50 basis point rate cut, while a steady or stronger CPI number might limit the outcome to only a 25 basis point rate cut. 

Daily digest market movers: CPI last chance to move needle for Fed decision

• A CNN poll revealed that 63% of the viewers saw Harris as the winner of the presidential election debate, Bloomberg reported. 
• At 11:00 GMT, the Mortgage Bankers Association released its weekly Mortgage Applications number for the week ending September 6. Prior week, there was a rise of 1.6%, with this week coming in at 1.4%. 
• At 12:30 GMT, the US Consumer Price Index (CPI) for August will be released:
  • Monthly Headline CPI inflation is expected to remain stable at 0.2%.
  • Yearly Headline CPI inflation is expected to ease to 2.6% from 2.9%.
  • Monthly Core CPI inflation should remain at 0.2%.
  • Yearly Core CPI inflation is expected to remain at 3.2%.
• At 17:00 GMT, the US Treasury will allocate 10-year notes. 
• Equities are struggling, with Asian equities already closing with losses often more than 1% on Wednesday. European equities are in the red, though less than 0.5%. Meanwhile US Futures are down by 0.5% on average. 
• The CME Fedwatch Tool shows a 67.0% chance of a 25 basis points (bps) interest rate cut by the Fed on September 18 against a 33.0% chance for a 50 bps cut.  For the meeting on November 7, another 25 bps cut (if September is a 25 bps cut) is expected by 27.2%, while there is a 53.2% chance that rates will be 75 bps (25 bps + 50 bps) and a 19.6% probability of rates being 100 (25 bps + 75 bps) basis points lower. 
• The US 10-year benchmark rate trades at 3.61%, a fresh 15 month low at levels not seen since mid-June 2023. 

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