FXStreet reports that economists at MUFG Bank expect high inflation data to trigger further USD selling.

“The UST 10yr bond yield has crept higher since the brief decline immediately following the NFP on Friday, which is an indication of the market concerns over the building bottlenecks in manufacturing and hence the fear of a big inflation number in the US today.” 

“In all likelihood, it will take a reading greater than the 0.3% MoM core CPI consensus to really get a move in UST bond yields. But equally, a weaker print is unlikely to prompt too much of a decline. We see limited prospects of a significant currency reaction to a 0.3% MoM gain at this stage.” 

“A measure of the Fed’s continued success can be seen by the remarkable renewed decline in real yields. The US dollar will continue to struggle given that backdrop alone. A high inflation print matching consensus may well reinforce this and prompt modest USD selling today.”