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Core Inflation Rises
Similar to the reaction we saw to last week’s labour market data, the US Dollar failed to break lower on the latest US inflation figures released yesterday. While annualised headline CPI was seen cooling to 2.5% last month, down sharply from 2.9% and below the 2.6% the market was looking for, a small uptick in the core monthly reading (0.3% vs 0.2% expected) was seen dampening the bearish reaction to the data.
Fed & US Elections
On the back of last week’s mixed jobs data (weaker NFP, better unemployment, higher wages), USD bears were looking for a definitively dovish CPI print this week to help revive USD selling through increased expectations of a deeper cut next week. On the back of the data, however, pricing for a .25% has surged higher to almost 90% from around 65% prior, fuelling some short covering in USD. The rally in the Dollar is likely being limited so far due to the fallout from Tuesday’s presidential elections debate. With most polls showing Harris as the winner, the odds of a Trump win in November have fallen.
Trump & USD
Given that a Trump win is seen as a stronger positive for USD, the current narrative is hampering USD upside. Looking ahead today, traders will now turn to the latest set of US PPI figures and weekly unemployment claims. If we see weakness in both sets of figures this should keep USD penned in around current levels ahead of next week’s FOMC meeting.
Technical Views
DXY
For now, DXY remains above the 100.93 support and looks to be forming a base. While this level holds, a fresh test of the 102.46 level and broken bull trend line looks likely. Above there, 104.05 is the next bull objective. To the downside, 99.67 is next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.