Title: Forex Market Outlook: USD Weakens Ahead of Key U.S. CPI Data
Source: Originally published by Justin Low on Mitrade.com
Link: https://www.mitrade.com/insights/news/live-news/article-1-1114306-20250911
As the foreign exchange (Forex) market begins its day on September 11, 2025, market participants are closely watching the U.S. Dollar (USD) as it experiences moderate softening in early European trading. This movement is driven by expectations surrounding the upcoming U.S. Consumer Price Index (CPI) data, which could influence the Federal Reserve’s monetary policy path significantly.
The following comprehensive analysis draws from current market developments and sentiment, shedding light on how traders are positioning themselves amid upcoming economic releases and geopolitical uncertainty.
Key Factors Influencing the Forex Market Today
1. U.S. Dollar Under Pressure
– The USD is trading slightly weaker across most major currency pairs in early European trade.
– Traders are acting with caution ahead of the U.S. CPI report due later in the day, which is expected to provide clarity on inflation trends and potentially impact Federal Reserve interest rate decisions.
– Uncertainty in Treasury yields is also playing a role, with a slight dip in yields contributing to the USD’s modest downward pressure.
2. U.S. CPI Data Anticipation
– Forecasts indicate that the core CPI will remain at 0.2% month-over-month, while headline CPI is expected to rise 0.5% month-over-month.
– On a year-over-year basis, the headline inflation rate may climb to 3.6%, a noticeable increase from the previous 3.2%.
– Markets are particularly sensitive to any sign that inflation is not cooling as expected, as this could prompt the Federal Reserve to consider additional rate hikes.
– If inflation numbers come in hotter than expected, the USD could reverse its current softness and strengthen quickly.
3. Federal Reserve Expectations
– Current market pricing (as per CME FedWatch Tool) shows only a slim probability of a rate hike in the September Federal Open Market Committee (FOMC) meeting.
– However, expectations for the Fed’s course of action in November or December remain uncertain and heavily dependent on inflation data.
– A higher CPI reading could revive rate hike bets, boosting the USD and impacting equity markets negatively.
– The current narrative suggests that the Fed may be near the end of its tightening cycle, but any resurgence in inflationary pressure could change that outlook rapidly.
4. Treasury Yields and Risk Sentiment
– U.S. 10-year Treasury yields slid slightly in early trading, reflecting caution ahead of CPI data.
– Globally, sentiment remains mixed as traders adjust to uncertainties surrounding China’s economic trajectory and recent developments in European economies.
– The subdued tone in yields and equity futures supports a mild risk-on sentiment, which typically weighs against the USD and favors risk-sensitive currencies.
5. Currency Market Movements
Below is a snapshot of major currency pair movements noted in early European hours:
– EUR/USD: Trading around 1.0735, showing signs of resilience as the euro benefits from a weaker dollar and steadier Eurozone sentiment. ECB rate expectations remain in focus.
– GBP/USD: The pair is trading at 1.2510, advancing modestly as UK wage and employment data painted a tight labor market, keeping prospects for a Bank of England rate hike alive.
– USD/JPY: Trading near 146.70, moving slightly lower as Japanese officials continue to signal potential currency intervention. Bank of Japan remains inactive on rate changes but increasingly vocal about FX stability.
– AUD/USD: Positioned near 0.6430, the Australian dollar sees minor gains amid improved Chinese sentiment and cautious optimism in commodity markets.
– NZD/USD: Trading at 0.5915, the kiwi dollar is holding ground ahead of New Zealand GDP data expected later in the week.
– USD/CHF: The Swiss franc gains
Explore this further here: USD/JPY trading.