US Dollar: CPI-driven range signals carry focus – OCBC
OCBC’s Sim Moh Siong and Christopher Wong highlight that the US Dollar (USD) stayed mixed as markets waited for the key United States (US) Consumer Price Index (CPI) release, with Middle East tensions and hawkish Federal Reserve (Fed) rhetoric offsetting each other.
OCBC analysts Sim Moh Siong and Christopher Wong report that the US Dollar (USD) exhibited mixed performance as investors awaited the US Consumer Price Index (CPI) release. The Middle East tensions and hawkish comments from the Federal Reserve (Fed) balanced each other out, leading to a range-bound USD and a supportive backdrop for carry trades in the near term.
The CPI is expected to play a crucial role in shaping September FOMC interest rate decisions; a CPI reading of 0.3% month-over-month (MoM) or higher, higher than the 0.2% consensus forecast, could boost expectations of a rate hike. Meanwhile, a more optimistic NFIB Small Business Optimism Index, rising to 99.8 in July from 97.4 in June, highlighted a strong rebound in hiring intentions.
This positive data is expected to influence market reactions prior to the September FOMC meeting, which is currently viewed as a near-even split between a rate increase and a hold. Despite volatility in oil markets and currency intervention risks in the Japanese Yen (JPY), carry trades are anticipated to remain supported by the range-bound USD and a generally positive risk environment.
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