USD: Firmer footing before CPI – MUFG

MUFG’s Senior Currency Analyst Lee Hardman notes the US Dollar is ending the week on a firmer footing after stronger nonfarm payrolls, with particular gains versus the Australian Dollar and Norwegian Krone. He highlights that softer US CPI should support further Federal Reserve rate cuts this year, while potential tariff rollbacks by President Trump could ease inflation and ultimately encourage a weaker US Dollar.

Dollar steadies as Fed path reassessed

"The US dollar is finishing this week on a firmer footing following the release of the much stronger than expected nonfarm payrolls report although it has failed build on initial gains."

"The macro focus today will be the release of the latest US CPI report for January."

"However, today’s US CPI report should provide some relief for the Fed revealing that core inflation continues to slow."

"The combination of stronger productivity growth, fading inflationary impact from tariff hikes, slowing wage growth and inflation  should keep the door open to further Fed rate cuts this year even if downside risks to the labour market are beginning to ease."

"A further reversal of some of the tariff hikes would help to ease inflation pressures, and create more leeway for the Fed to lower rates thereby encouraging a weaker US dollar."

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