The US Dollar (USD) reflects a sideways performance against its peers ahead of the United States (US) Consumer Price Index (CPI) data is scheduled to be published at 12:30 GMT.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades flat at around 99.85
US Dollar steadies as markets await pivotal July CPI print for Fed path Strategists at Brown Brothers Harriman note that “markets are in a holding pattern ahead of today’s critical US July CPI report (1:30 pm London, 8:30 am New York),” with the release expected to be “a key swing factor for Fed funds rate expectations and set the tone across rates, currencies, and broader risk sentiment.” They point out that Fed funds futures currently assign “50% odds of a 25bps hike in September to a target range of 3.75-4.00%, down from a high of 75% end-July,” and are pricing in “just over 40bps of cumulative tightening in the next twelve months.” BBH expects “US July CPI to firm modestly but stop short of signaling a renewed acceleration in inflation,” with headline CPI forecast to “rise +0.1% m/m vs. -0.4% in June and ease to 3.4% y/y vs. 3.5% in June,” while core CPI is seen “to rise +0.2% m/m vs. 0.0% in June and ease to 2.5% y/y vs. 2.6% in June.” In terms of market reaction, the bank argues that “a soft US CPI would strengthen the case for a dovish repricing in Fed hike expectations and further undermine USD while lifting risk assets.” Conversely, “a hot US CPI will likely deliver a knee-jerk USD bounce via higher front-end yields.” However, BBH cautions that with “Fed policy already restrictive (assuming a neutral rate of 3.00%), the scope for a material hawkish repricing looks limited, which is a USD headwind.” This week, investors will also focus on the US Producer Price Index (PPI) data for July, which will be released on Thursday. On the global front, a source from Iran has confirmed that Iran and the US are not having discussions regarding extending the…