Core Viewpoint - The upcoming Consumer Price Index (CPI) report is expected to show data that may be below expectations, which has led to an increase in U.S. stock index futures. A significantly lower CPI could increase the likelihood of the Federal Reserve cutting interest rates by 50 basis points [1] Group 1 - The CPI report is set to be released tomorrow, indicating potential market movements based on its results [1] - A lower-than-expected CPI, particularly a substantial deviation from expectations, could enhance the probability of a 50 basis point rate cut by the Federal Reserve [1] - The Producer Price Index (PPI), excluding food and energy, has recorded its largest month-over-month decline in the past decade [1]

Core Insights - The Producer Price Index (PPI) for August in the U.S. is expected to show a year-over-year increase of 3.3%, maintaining the same growth rate as July [1][3] - Market expectations indicate a higher likelihood of the Federal Reserve lowering interest rates by 50 basis points in September, with a 50 basis point cut becoming more probable [1][4] - The upcoming PPI data is anticipated to have a limited impact on the dollar prior to the release of the Consumer Price Index (CPI) data [1][3] PPI and CPI Overview - The PPI report, compiled by the Bureau of Labor Statistics (BLS), is set to be released on Wednesday, a day earlier than the CPI report [3] - PPI measures wholesale or producer-level inflation, while CPI focuses on the total value of goods and services purchased by consumers [3] - The core PPI, excluding volatile food and energy prices, is projected to rise by 3.5% year-over-year, down from 3.7% in the previous month [3] Market Reactions and Federal Reserve Expectations - Following the release of weak employment data, market participants have fully priced in the expectation of a rate cut by the Federal Reserve [4] - The likelihood of a 25 basis point cut stands at 88.2%, while the chance of a 50 basis point cut is at 11.8% [4] - Federal Reserve Chairman Jerome Powell's comments at the Jackson Hole symposium have significantly influenced market expectations regarding potential rate cuts [4][5] Currency Market Implications - The PPI report is expected to influence the euro/dollar exchange rate, with current trading above the 1.1700 mark [5] - Analysts suggest that if the euro/dollar breaks below the support level of 1.1700, it may test buyer resolve around 1.1650 [5] - The euro/dollar may not see further increases post-PPI release, but could rise following the CPI data release, with a key level to watch at 1.1900 [5]