USD: The surprise would be a 0.2% MoM CPI today – ING

The Dollar Index (DXY) was a little softer yesterday – largely on the back of some strength in the euro. There is a sense of fatigue in some of the Trump trades, where this year's U-turns on tariffs have made it a lot harder to reach definitive conclusions. At present, we are waiting to hear if 'reciprocal' tariffs are coming this week. At a country level that could leave the likes of Korea, India, and Brazil the most exposed, ING's FX analyst Chris Turner notes. 

107.30/50 could be the risk on DXY

"The challenge for traders is that, despite some fatigue in the Trump trades, there's no way to predict if tomorrow will be the day Washington significantly expands tariffs. That's why we're reluctant to call a meaningful dollar correction without some kind of macro-supporting evidence."

"Could that evidence come through today? Well, there are annual benchmark revisions to the US CPI series due today. These are a little uncertain but could increase the risk of today's US January CPI release coming in at 0.2% month-on-month versus the expected 0.3%. At a stretch, this could point to the Fed having a little more confidence in the disinflation process and the market shifting back to pricing 50bp of 2025 rate cuts versus just the 35bp priced today."

"Given some sense of stability in financial markets as US interest rate volatility falls – the MOVE index is dipping back to January lows – we see a little downside risk to the dollar now. 107.30/50 could be the risk on DXY. However, a new round of tariffs could easily blow any ideas of a dollar correction out of the water."