It has been a trendless week for the dollar so far. Today sees the biggest data event risk of the week – and probably of the month, The Consumer Price Index (CPI) in the United States. Economists at ING expect the report to keep the dollar well supported.

CPI to cement the cycle

“US July CPI is expected to soften a little on a headline basis but nudge up on a core basis to just above 6% year-on-year. Stubbornly high core inflation should support the Federal Reserve’s position that its work is far from done. It should also support pricing in the US money market curve that sees the policy rate taken around 125 bps higher in this cycle.”

“Barring a massive upside surprise that can demand an extra 25-50 bps or so priced into the back end of the curve (and sending the dollar a leg higher), we expect the inflation data to cement current tightening expectations and keep the dollar bid near the high.”

“105.70-107.00 are now the short-term parameters for DXY.”

See – US CPI Preview: Forecasts from nine major banks, soaring inflation to ease off in July