Dollar Hits a new Two-month bottom on more rate hike bets. The US inflation report due out on Wednesday will continue to be crucial for dollar
Dollar index has just reached a two-month bottom.
After statements from Fed members on Monday hinted they are considering delaying further hikes in interest rates if statistics allows.. The US Fed may be considering delaying additional hikes after a 25 bps rise is completely factored in. Ending its fifteen-month period of monetary policy hardening.
According to the most recent CME Fed Fund probability, rates will hit a high during the month. After entering a time of quiet as we approach the next year.
LIKELIHOODS FOR THE CME FED FUND
Source: CME
The market anticipates a dramatic decline in overall inflation for the year to three percent versus 4.0% this past month (May). When the most recent US inflation statistics is issued on Wed. During June of the previous year, headline inflation stood 9.1 percent. Core inflation is expected to drop to 5.0% following an estimate of 5.3% during the previous month. Since it is showing to be a little more rigid and raising additional worries for the Fed.
Dollar Moving into a Cluster
The dollar’s value has been sliding strongly from Friday’s close. bursting through the respective 20- & 50-day SMA, According to the daily US dollar graph. The US dollar is currently moving towards a group of past lowest levels set around the start of April & mid-May this year. Which serves as a support area. The crucial 100 mark will likely intervene prior any additional declines in the dollar can occur, preferably temporarily.
The continuous rate hike cycles for various currencies, especially the Euro & the UK Pound, It will cause greater strain on the US dollar. Since near-term US bond rates will probably stay at, or slightly beneath, present levels. Thus, in the next months, outside factors are going to determine the direction that the US greenback index will take.
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Any setback (i.e., real CPI reporting in above what was anticipated) It would trigger a USD recovery. However, the USD might decline much lower once we do receive a headline reading in the low-3% range or possibly a core reading below 5 percent.
The most recent Bloomberg survey indicated forecasts of a headline CPI reading of 3.1 percent (a decrease from 4 percent YoY in May). With a core CPI read of 5 percent (a decline from 5.3%).
| Calendar | GMT | Reference | Actual | Previous | Consensus | TEForecast | |
|---|---|---|---|---|---|---|---|
| 2023-05-10 | 12:30 PM | Apr | 303.363 | 301.836 | 303.532 | 303.3 | |
| 2023-06-13 | 12:30 PM | May | 304.127 | 303.363 | 304.063 | 304.9 | |
| 2023-07-12 | 12:30 PM | Jun | 304.127 | 305.219 | 305.79 | ||
The US (CPI) data, the most crucial indicator of inflation. It will be released by the US Bureau of Labor Statistics (BLS) on July 12 at 12:30 GMT.
According to ING – The yearly averages of overall and core inflation (excluding food & energy) would both fall to 3.1% and five percent, accordingly. With an outcome of 0.3 percent M to M. Although this won’t change the probability of a raise for July. It might provide some respite and cause longer-term projections for interest rates to move somewhat downward.
