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11/07/24
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USD Lower Before CPI Release
On Thursday, the U.S. dollar dropped in early trade in Europe before a key inflation report later in the day.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded down 0.2% at 104.552, dropping to the lowest level since June.
The dollar edged down and extended overnight losses after Fed Chair Jerome Powell confirmed his outlook that the U.S. economy will achieve a soft landing.
Powell also said that the Fed didn’t need to see inflation dropping below the 2% target before starting to cut rates. The central bank only required enough confidence that inflation was cooling.
This puts the focus squarely on the June CPI release later today, with any indications of inflation easing likely to lead to increased bets on a rate cut.
According to the CME Fedwatch tool, traders maintained a 72.5% probability the Fed would cut rates by 0.25% in Sept.
Analysts at ING said in a note they were slightly biased for a weaker dollar due to the market’s dovish tendency recently despite evidence for a cut in September being inconclusive.
They suspected such bias was partly due to Fed Chair Jerome Powell’s dovish move away from the latest dot plot projections by the FOMC, which included only one cut this year.
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