US inflation returns to the centre of the market conversation today, with investors looking to the latest Consumer Price Index (CPI) report for clues on what the Federal Reserve might do in September. Economists expect headline inflation to ease slightly to 3.4% year on year in July, from 3.5% in June, while core CPI, which excludes food and energy, is forecast to slow to 2.5%. On a monthly basis, headline prices are expected to rise 0.1%, with core prices increasing 0.2%.
Investors are awaiting today's release of the US ISM Services Purchasing Managers' Index (PMI), one of the most closely watched indicators of economic activity. Economists expect the index to come in at 54.0, a level that would signal continued expansion in the services sector. Any reading above 50 indicates that business activity is growing, while a figure below 50 points to contraction. Given that services account for around 70% of the US economy, the report is considered one of the clearest monthly indicators of underlying economic momentum.
Investors are focused on today's Federal Reserve policy decision, with interest rate futures indicating a 70.6% probability that policymakers will leave rates unchanged at 3.50% to 3.75%. Markets continue to assign a 29.4% probability to a 25-basis-point increase, highlighting that some uncertainty remains despite expectations favouring a pause.
US inflation slowed to 3.5%, strengthening expectations that price pressures are easing and prompting markets to reassess the Federal Reserve's policy outlook. The latest CPI data weighed on the US Dollar, supported gold and lowered Treasury yields.
Oil prices remained volatile on Thursday as renewed tensions in the Middle East continued to keep energy markets on edge. Brent crude traded around $77 per barrel, while West Texas Intermediate (WTI) hovered near $73, as investors weighed the risk of supply disruptions against hopes that the conflict would not spread further. Despite easing from the highs reached earlier this week, both benchmarks remain comfortably above the levels seen before the latest escalation, highlighting how geopolitical risks continue to underpin oil prices.