The market’s reaction to the July FOMC and Consumer Price Index (CPI)I release shows a premature eagerness to price in a Fed “pivot”. Economists at HSBC believe the Fed’s tightening path and associated USD strength are likely to persist until there is more evidence of slowing US core inflation.

It seems premature for market to price in a Fed dovish pivot

“Until there are further clear and sustained signs that US core inflation is destined to return to target, the Fed’s tightening path and associated USD strength are likely to persist.”

“We suspect the FX market continues to underplay the importance of the global economic slowdown underway. The risk-averse implications of this slowdown will continue to support the USD, given its ‘safe haven’ status.”