US Dollar: CPI and Fed rhetoric in focus – Commerzbank

Commerzbank analysts highlight cautious positioning in the Dollar ahead of July US CPI, with the Dollar Index steady near 99.83 and EUR/USD around 1.1540. Fed funds futures price roughly a 48% chance of a September hike, while hawkish comments from Chicago and Atlanta Fed officials underscore inflation concerns even as recent US data show mixed signals on growth and employment.

US inflation data to steer Dollar

"On the economic front, the focus shifts to today’s US CPI report for July, which could be important for the September FOMC decision. Consensus expects headline CPI to rise around 0.1% mom, with the yoy rate easing to around 3.4% from 3.5% in June. Core CPI is expected to rise around 0.2% mom and the annual rate at 2.5% yoy vs 2.6% in June."

"Chicago Fed President Austan Goolsbee said “the biggest problem facing our economy right now is inflation”. He added that “the labour market is stable without being good. As long as the consumer remains healthy, I think the economy is going to remain healthy.” His comments reinforced the Fed's continued focus on inflation despite last Friday's unexpectedly weak payrolls report."

"Atlanta Fed interim President Cheryl Venable also struck a hawkish tone. She said inflation is still too high, with any meaningful easing tied directly to the resolution of the Middle East conflict. She noted that a clear end to the war would free up oil shipments and ease energy prices, while prolonged conflict would do the opposite."

"The Fed funds futures are pricing in 48% probability of a 25p hike in September or 12bp. They are pricing in a total hike of 29bp by year-end."

"The Dollar Index was broadly unchanged at 99.83 and EUR/USD was little changed at around 1.1540."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)