USD Drops on PPI Decline
The US Dollar is on watch today as traders brace for the latest US CPI data. Yesterday, USD fell sharply as US PPI came in below forecasts. Core PPI was seen slipping to 0% from 0.3% prior while the headline reading fell to 0.1% from 0.2% prior. The data has been taken as an encouraging sign that overall inflation likely continued lower last month with the US Dollar falling accordingly.
CPI On Watch
Today, the market is looking for annualised CPI to remain unchanged at 3% YoY. If confirmed, the data will likely be broadly neutral for USD given that September easing expectations are already well baked into price. However, if see a downside surprise today, this should further bolster expectations of a quicker pace of easing from the Fed, driving USD lower near-term. On the other hand, if we see any upside surprise in today’s data this will likely dilute easing expectations beyond September, causing some lift in USD.
Bostic Says More Data Needed
Speaking yesterday, Fed’s Bostic said the bank needs to see more evidence of inflation returning to target before he can support a rate cut. However, he noted that recent data had made him more confident and if the economy continues to track its current trajectory, he expects rates to be lower by year end.
Technical Views
DXY
The index is once again testing support at the 102.46 level and the bull channel lows. With momentum studies bearish, risks of a deeper push towards 100.93 are seen if price breaks lower here. To the topside, 104.05 remains the key hurdle for bulls to get back above.
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