Looking at a breakdown of the report, the price components (prices paid, prices received) all declined, supporting the argument that inflation is no longer a concern. Meanwhile, the components measuring new orders, shipments, and number of employees all remained negative, pointing to waning demand and a continued deterioration in the labor markets.
With economic data signaling easing price pressures and economic contraction, there is little doubt that the Federal Reserve will announce a rate cut on Tuesday at 14:15 ET. As it stands, the Fed is widely anticipated to announce a 50bp cut to the fed funds rate, which would bring the rate down to 0.50 percent. However, this is actually on the lower end of what the markets are expecting, as fed fund futures are pricing in a 66 percent chance of a 75bp cut to 0.25 percent. This upcoming monetary policy decision will be extremely important not only because of the prospect of such historically low rates, but also because the FOMC’s policy statement may signal that they are done cutting rates, or may suggest that they are prepared to pursue unconventional options like quantitative easing. The news could have major consequences for the US dollar and risk trends in general, meaning that the Japanese yen crosses may experience significant volatility as well.
Related Article: US Dollar Weekly Forecast
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