USD: Stronger bearish case after CPI report – ING

Yesterday’s US CPI release turned out to be a dollar-negative event. Core inflation accelerating to 3.1% YoY and 0.33% MoM is far from ideal, but equally not alarming enough to overshadow the deterioration in the jobs market, ING's FX analyst Francesco Pesole notes.

Downside risks for the USD might be substantial

"So, the September Fed cut remains firmly priced in (23bp) along with another 35bp by year-end. At this stage, the dollar has few bullish arguments to hold onto. Upcoming surveys might paint a better activity picture, but it's all about the jobs market now: a substantial recovery in the dollar from these levels appears realistic only if jobs figures turn significantly stronger."

"On the topic of jobs data, it was reported yesterday that the new chief of the Bureau of Labor Statistics, EJ Antoni, is considering switching from monthly to quarterly payroll reports during a methodology review period. It’s hard to gauge exactly how seriously markets are taking this threat: the reaction has been muted. We think the downside risks for the dollar are substantial should the BLS go ahead with the frequency change."

"Today, there are no data releases to monitor in the US. The proximity to the Trump-Russia summit on Friday and recent reassessment of the chances of an imminent ceasefire mean the dollar may not fall much further for now."