Markets face a major week for interest rates, currencies and gold, with policy decisions from the US Federal Reserve and Bank of Japan alongside fresh UK inflation data.
The Federal Reserve decision on Wednesday 16 September is the main event. Markets are pricing an 86% chance of a rate increase after stronger inflation data, with a 25 basis point move seen as the most likely outcome.
The decision itself may be less important than what comes next. Updated economic projections and comments from Federal Reserve Chair Kevin Warsh will give markets more information on whether further tightening is likely.
Gold is one area where that guidance could matter quickly. The price recently moved close to $4,685 before falling back towards $4,350. A more restrictive Federal Reserve message could push gold below the $4,300 support area, which would bring $4,000 into focus. Further weakness could expose the $3,700 level.
If gold holds around $4,350 and the Federal Reserve takes a less restrictive tone than expected, the recent high near $4,685 could come back into view. The immediate risk is therefore tied closely to how much tightening is already reflected in current market pricing.
The Bank of Japan follows on Friday 18 September. Markets are assigning around a 98% probability to a rate increase, with another move also possible in December 2026 or January 2027.
Higher Japanese rates would strengthen the case for further yen support. The currency has already gained as expectations of tighter policy have increased. Higher borrowing costs in yen could also reduce the appeal of carry trades funded with cheap Japanese money.
AUD/JPY is trading near support between ¥109 and ¥110. A break below that range, combined with restrictive Bank of Japan guidance, could bring ¥107.50 into focus.
If the Bank of Japan holds rates or signals a slower path for tightening, AUD/JPY could recover towards ¥115. That makes the policy message important for positioning across yen crosses.
UK inflation is the other major event on Wednesday. Headline inflation is expected to rise from 2.9% to 3% year on year, while core inflation has also been showing signs of renewed pressure.
Markets are pricing a Bank of England rate increase in November, which would take the base rate from 3.75% to 4%. A further increase to 4.25% is possible in December.
The key question is whether stronger inflation could bring forward expectations for action at the Bank’s 17 September meeting. That remains unlikely without a meaningful upside surprise, but the data could still shift expectations around the timing and pace of future rate increases.
Sterling is also sensitive to the result. GBP/USD has been holding around $1.35. A softer inflation reading could weaken expectations for higher rates and push the pair below $1.348, with $1.328 then becoming the next key support area.
If support holds, GBP/USD could instead move towards $1.365. A break above that level would improve the short-term outlook for the pound.
CMC Markets plc (LON:CMCX) is a UK-based financial services company that offers online trading in shares, spread betting, contracts for difference and foreign exchange across world markets.
