The greenback has discovered some help forward of in the present day’s US CPI launch. A few of this will likely mirror profit-taking in nonetheless comparatively crowded USD shorts, in addition to President Trump’s choice to increase the tariff pause on China by one other 90 days. Additionally contributing may very well be Trump’s try and downplay expectations for Friday’s summit with Putin, calling it a ‘feel-out assembly’ to gauge Russia’s calls for, and including ‘that’ll be the tip’ if no settlement is reached. Markets had presumably priced in a barely extra optimistic stance on a faster decision, ING’s FX analyst Francesco Pesole notes.
FX stays considerably delicate to geopolitical developments
“We’ll proceed to watch headlines into Friday – Trump speaks with Zelenskyy tomorrow – as FX stays considerably delicate to geopolitical developments. Nonetheless, as mentioned yesterday, information ought to stay the first driver for USD. We anticipate a 0.4% MoM core CPI print in the present day, above the 0.3% consensus. That may push YoY core inflation from 2.9% to three.1%, and headline from 2.7% to 2.9%.”
“Regardless of some positioning rebalancing forward of the discharge, a hotter-than-expected print ought to nonetheless help the greenback, as markets might revise down expectations for a September Fed minimize to under 20bp. Nonetheless, we predict labour market information is extra influential than inflation, given the consensus view that tariff-induced worth shocks are transitory and final month’s massive payroll revisions. So even a 0.4% MoM core print might nonetheless be in step with a September minimize – if accompanied by additional labour market deterioration.”
“For that cause, our above-consensus inflation name doesn’t translate into expectations for a sustained USD rally. We see any help as short-lived. Additionally on in the present day’s US calendar: the NFIB Small Enterprise Optimism Index and July’s Federal price range information.”
