Dollar On Watch Into US CPI Today
US Inflation Due
The US Dollar is rallying today ahead of the upcoming April inflation print due this afternoon. Annualised CPI is expected to have risen to 3.7% from the prior month’s 3.3% reading, reflecting growing inflationary pressures as a result of elevated energy prices linked to the Iran war. Crude prices have failed to break lower since the ceasefire was announced and a lack of progress has kept uncertainty rife. With energy prices still elevated, inflation is expected to continue higher near-term with increasing pressure on the Fed accordingly.
Fed Tightening Expectations
If CPI rises in line with forecasts today, USD is vulnerable to a fresh push higher as near-term Fed tightening expectations become more entrenched. There is currently no hike priced in for this year though CME groups shows a roughly 20% chance of a hike by October and around 33% by year end. If CPI comes in hot today, this could well see year end pricing crossing above the 50% level, pushing USD up firmly. On the other hand, if CPI comes in below forecasts today, this should see USD remaining anchored near the bottom of the recent leg lower with rate forecasts likely to remain unchanged or see a slight dovish shift.
Technical Views
DXY
For now, DXY remains within the falling wedge pattern which has framed the correction lower from YTD highs. If we break above the 98.24 level and the wedge top, focus will shift to the 99.15 level next. To the downside, 96.63 remains the key support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.