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11/06/24
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USD Reaches Hits 4-Week High Before Inflation Report Due on Wednesday
On Tuesday the US dollar reached a 4-week high before a highly anticipated inflation report that will likely influence the timing of the U.S. Federal Reserve’s first rate cut.
Higher-than-expected jobs gains and stronger wage inflation in the jobs report for May released on Friday fueled worries that inflation may stay persistent while growth remains strong, making it less likely that the U.S. central bank will cut rates in the next few months.
Traders have trimmed expectations of the first rate cut in Sept., which now has roughly even odds.
On Wednesday, the consumer price index data is due, just ahead of the Fed concluding its 2-day meeting.
The U.S. central bank is generally expected to keep interest rates the same, but Fed policymakers will update their forecasts – which is known as the “dot plot.”
If inflation stays in line with expectations, the dots will likely show an expectation of two 0.25% cuts this year, down from the March estimates of a median projection of three cuts.
The senior macro strategist at State Street Global Markets, Noel Dixon, said he thought the relative monetary policy divergence story would emerge again and he believed that would continue to be supportive for the dollar for the rest of the year.
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