Silver (XAG/USD) has been consolidating within a tight range over the past four trading sessions, with prices capped around $31.00. Investors are holding their positions ahead of the United States Consumer Price Index (CPI) data for June, set to be released at 12:30 GMT.
This upcoming inflation report is expected to heavily influence market speculation regarding potential Federal Reserve rate cuts later this year. The CME FedWatch tool indicates that traders are increasingly anticipating that the Fed might pivot towards policy normalization as early as the September meeting. Additionally, the tool suggests there might be two rate cuts this year, contrary to the single cut signaled by Fed officials in the latest dot plot.
Expectations for the US CPI report are that core consumer inflation, which excludes volatile food and energy prices, has grown steadily. However, the annual headline figure is predicted to have declined to 3.1% from May’s 3.3%.
Strengthening expectations for Fed rate cuts have been fueled by signs of strain in the US labor market, attributed to the central bank’s continued restrictive interest rate stance. During his semi-annual testimony to Congress, Fed Chair Jerome Powell acknowledged that the economy is no longer overheated, with the labor market cooling to pre-pandemic levels.
These firm rate-cut speculations have exerted pressure on the US Dollar (USD). The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is hovering near a four-week low around 104.85.
Overall, market participants are keenly watching the upcoming CPI data, which will be crucial in determining the Fed’s future monetary policy actions and the direction of silver prices.
