Upcoming US CPI, PPI, and Fed testimony may reinforce hawkish rate expectations, supporting the USD near-term.
The US Dollar (USD) is poised for slight gains in the coming months as stabilizing labor markets and persistent inflation keep Federal Reserve rate hike expectations elevated. Fed funds futures fully price in a 25bps increase to a 3.75-4.00% range by year-end, with nearly 50bps of additional tightening over the next twelve months.
June’s Consumer Price Index (CPI) data, due Tuesday, is expected to show headline inflation falling 0.1% month-over-month, driven by lower gasoline prices, while core CPI remains steady at 2.9% year-over-year. Producer Price Index (PPI) and the University of Michigan sentiment survey later in the week will further clarify inflation trends.
Fed Chair Kevin Warsh’s congressional testimony will add volatility as markets assess his views on inflation and policy direction. The Fed’s Beige Book, also due Wednesday, will provide additional context on economic conditions.