Forex Today: Markets brace for volatility on ECB verdict, US Retail Sales and PPI data

Here is what you need to know on Thursday, September 14:

Markets remain cheerful, as Asian stocks rise after the all-important US Consumer Price Index (CPI) data cemented Federal Reserve (Fed) pause bets. The US S&P 500 futures, the risk barometer, is up nearly 0.30% on the day.

On Wednesday, the annual United States inflation gauge rose 3.7% in August, compared with a 3.6% rise expected. The CPI rose 0.6% in August, its biggest monthly gain of 2023 but matched the market consensus. The core CPI increased 0.3% and 4.3% respectively, against estimates for 0.2% and 4.3%. 

Money markets continue to price a Fed rate hike pause next week while the probability for a November rate hike remains at about 40%, according to the CME Group’s FedWatch Tool. The dovish Fed expectations remain intact, which seems to be weighing on the US Dollar and the US Treasury bond yields in the European trading.

Within the G10 FX currency basket, the Australian Dollar is the strongest, followed by the Japanese Yen while the Canadian Dollar is the weakest heading into the European session.

AUD/USD is consolidating strong Australian jobs data-led gains at around 0.6435. The Australian economy added 64,900 jobs from the prior month, driven by part-time jobs, the Australian Bureau of Statistics (ABS) data showed Thursday. The Unemployment Rate held steady at 3.7%, as expected.

USD/CAD is on the back foot below 1.3550, despite a pause in the oil price rally. WTI is stabilizing near ten-month highs of $89.

USD/JPY is pressured toward 147.00, as the Japanese Yen draws support from comments delivered by Japan’s newly appointed Economy Minister Yoshitaka Shindo. Shindo said that he “will mobilize all possible policy measures to support the economy.” Weaker US Treasury bond yields are also adding to the weight on the major.

EUR/USD is keeping its recovery mode intact near 1.0750 in the run-up to the ECB showdown. The central bank is widely expected to leave key rates on hold later in the day. The updated economic projections and President Christine Lagarde’s speech will hold the key for hints on the ECB’s future policy path and a clear direction for the Euro. The ECB's quarterly projections will put inflation north of 3.0% in 2024, Reuters reported on Wednesday, citing sources.

GBP/USD is battling 1.2500 amid the UK economic woes and a broadly softer US Dollar. The ECB decision could have a EUR/GBP cross-driven ‘rub-off’ effect on Cable.

Gold price is wallowing in three-week lows near $1,905, with sellers awaiting a sustained break of the $1,900 threshold for further declines.