**Market Outlook: US CPI, US-China Truce Deadline, Trump-Putin Talks Under Spotlight**
By Alpari Analyst Team
Global financial markets kick off the week with high anticipation as multiple headline events shape Forex trading flows. Investors brace for critical United States Consumer Price Index (CPI) data, uncertainty over the US-China trade truce’s looming deadline, and the much-publicized Trump-Putin meeting at the G20 summit. The coming days are set to significantly influence currency pair direction, volatility, and broader risk appetite.
### US CPI to Gauge Next Fed Move
The United States Consumer Price Index (CPI) is scheduled for release midweek and is a pivotal indicator for market participants. As inflation data directly influences Federal Reserve monetary policy decisions, the outcomes can move both the dollar and cross-asset markets.
**Why US CPI Matters for Forex:**
– The US Federal Reserve has indicated recent interest rate decisions depend on economic data, especially inflation.
– A higher-than-expected CPI suggests persistent inflationary pressures, increasing the likelihood of rate hikes and thus supporting the US dollar.
– Meanwhile, a soft inflation reading could encourage speculation that the Fed may adopt a more dovish stance, potentially weakening the US dollar.
– Subsequent market expectations are swiftly re-priced into yields and the greenback.
**Current Market Expectations:**
– Consensus forecasts point to a modest monthly increase in both headline and core CPI.
– Sticky shelter and wage inflation remain near the core of price pressures, but moderation in energy and used-car prices may cool the headline figure.
– Currency traders will be dissecting the actual report versus forecast with heightened sensitivity, given recent mixed signals from labor and growth data.
**Scenarios and Forex Reactions:**
– **Hot CPI Print (Above Consensus):**
– Strengthens the USD, weakens EUR/USD and GBP/USD, as Treasury yields may spike higher.
– Emerging markets and risk-linked currencies could feel pressure.
– **Soft CPI Print (In Line or Below):**
– USD may give back recent gains, prompting rallies in rivals such as the euro, pound, and commodity currencies.
– Yen, as a safe haven, may respond less unless there is risk-off spillover.
### US-China Truce Deadline Approaches
Midweek also signals the expiration of the 90-day trade truce between the United States and China, which was announced at a previous G20 meeting. While negotiators have worked to resolve major disputes, markets remain wary of renewed escalation or tariffs.
**Trade Truce Timeline:**
– The truce was initially designed to pause tariff increases and allow time for negotiation.
– Core issues include technology transfer, intellectual property, market access, and reducing the bilateral trade imbalance.
– As the deadline nears, any announcements, leaks, or tweets carry the risk of pronounced FX volatility.
**Potential Outcomes:**
– **Truce Extension or Partial Deal:**
– Risk assets and currencies leveraged to global growth (AUD, NZD, CAD) may rally.
– The Chinese yuan is likely to strengthen, reflecting relief from tariff escalation.
– **No Agreement, Tariffs Resume:**
– Safe-haven flows may dominate (USD, JPY, CHF), while commodity currencies and emerging market FX weaken.
– Global growth narrative is challenged, extending risk aversion.
**How Major Pairs Could Respond:**
– **AUD/USD and NZD/USD:** Both pairs would benefit from a de-escalation. Failure to reach a deal might extend recent downside moves.
– **USD/CNH:** The offshore yuan will react quickly to news on the trade front, with a weaker yuan signaling market disappointment.
– **EUR/USD:** Given Europe’s export exposure to China, a negative truce outcome could constrain the euro’s upside despite independent drivers.
### Trump-Putin Meeting at G20 in Focus
The G20 summit in Osaka brings together the world’s top leaders with major geopolitical implications. Though the US-China
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