The Federal Reserve meets on September 21, and short-term interest rate markets are currently pricing in a 92% chance of a 75bps rate hike. Before it meets there are two key data points and a speech from Powell on Thursday this week at 14:10 UK time. At the Jackson Hole Symposium Powell mentioned that jobs and inflation data would be important going forward for the pace of US interest rates as the Fed is now on a data-dependent path. So, on Tuesday 8th September we have the US ISM services PMI print and then on Tuesday, September 13, we have the US core inflation print. If we see a miss in both of these prints it will likely increase the expectation that the Fed will only hike by 50bps and that could see the DXY weaken into the next FOMC meeting.

Look at the period of weakness that is ahead in the USD.

Major Trade Risks: The major risk here is that Inflation prints high and the US services data prints firm which will keep up expectations that the Fed will be able to raise rates aggressively.

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