**WAITING FOR U.S. CPI DATA!**
U.S. stock futures are down this morning, amidst significant anticipation for today's consumer price index (CPI) data, which could help determine the size of the Federal Reserve's interest rate cut scheduled for next week, on September 18. Currently, markets are assigning a 66% probability of a 25 basis point cut, with a 34% chance of a larger 50 basis point reduction, according to CME's FedWatch tool. Meanwhile, last night saw the first, and likely only, debate between Kamala Harris and Donald Trump. It appears that the Democratic candidate's odds of winning may have slightly increased. In yesterday’s trading, the $DJ30 fell by 0.23%, while the $SPX500 and the $NSDQ100 gained 0.45% and 0.84%, respectively. However, during the Asian session, there was a sudden spike in risk aversion following the collapse of the $USDJPY and the Japanese stock market, triggered by hawkish comments from a Bank of Japan policymaker. BOJ board member Junko Nakagawa stated that the central bank would continue raising interest rates if the economy and inflation move in line with its forecasts. The yen rose to its highest level of the year following her remarks, putting additional pressure on the markets. On the economic front, Japan's manufacturing sentiment fell to a seven-month low in September amid concerns about weak Chinese demand.
**CURRENCIES.**
In the forex market, after a day of slow but steady recovery for the dollar, the $USDJPY plummeted following Nakagawa's statements, breaking through 141.70 and impulsively dropping towards the next target in the 140.40-50 area. This drop also pushed the $USDCHF lower, with a test of 0.8420 and possible targets at 0.8380. Consequently, $EURCHF fell to 0.9310, with all Swiss franc crosses under significant pressure. $EURUSD and $GBPUSD rose above 1.1050 and 1.3110, nearing key resistance levels but lacking strong momentum. Risk aversion is increasing, with pairs like $EURAUD and $EURNZD climbing due to weaker oceanic currencies against the recovering euro and pound. Risk aversion may continue as major players have entered the JPY market, with expectations for further significant declines beyond current levels. A potential break of the psychological threshold of 140.00 could pave the way for medium-term targets at 126.70.
**OIL.**
$OIL futures rose to about $66.2 per barrel last night, slightly bouncing back from their lowest level since May 2023, supported by concerns over supply disruptions due to the Gulf storm. Francine has strengthened into a Category 1 hurricane in the western Gulf of Mexico and is expected to intensify further before making landfall in Louisiana, posing a threat to refining operations along the Gulf Coast. Additionally, API data showed that U.S. crude oil inventories unexpectedly fell by 2.79 million barrels last week, against market expectations of a 0.7 million barrel increase. However, a bearish trend remains in the oil market due to concerns over declining global demand, particularly from China. Have a great day and good trading.
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