US Dollar: Inflation data and Middle East risks – Commerzbank
Commerzbank FX analyst Antje Praefcke notes that July US inflation is expected to rise only 0.1% month-on-month, with headline and core rates slipping to 3.4% and 2.5% year-on-year.
Commerzbank's FX analyst Antje Praefcke anticipates only a slight 0.1% increase in US inflation in July, with 3.4% and 2.5% year-over-year for headline and core rates respectively. Praefcke believes the Federal Reserve is unlikely to raise interest rates in September, but the Dollar's direction may be influenced by the data and ongoing Middle East developments.
The temporary easing of tensions in the region and lower gasoline prices in early July are expected to cause the Dollar to rise by just 0.1% month-over-month. The Federal Open Market Committee (FOMC) is likely to wait for more inflation data before deciding against an early September rate hike. A weaker-than-expected inflation report could prompt the market to lower its expectations further, putting downward pressure on the Dollar.
Conversely, a stronger report might confirm the market's expectations for a rate hike, potentially bolstering the Dollar. The Dollar may become more volatile and turbulent again by midweek.
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