US Dollar: CPI-driven moves point to near-term stability – MUFG
Lee Hardman at MUFG reports that the US Dollar’s initial post-CPI weakness quickly reversed, with the dollar index returning to around 100.00 as markets trimmed but did not abandon expectations for a September Fed hike.
A recent report by MUFG suggests that the U.S. dollar's initial decline in response to the latest CPI data has been swiftly reversed, leading to a stabilization of the dollar index around 100.00. July's CPI figures, which were released on Friday, matched market expectations, with energy prices fueling the gains. Core inflation remains under control, and MUFG expects the Federal Reserve to maintain rates steady in September.
The latest CPI data showed a 0.1% month-over-month increase in headline CPI and a 0.2% increase when excluding food and energy, indicating inflation is still elevated at 3.4%. Despite this, the report indicates that the Fed is more likely to keep rates on hold in September. The absence of significant surprises in the CPI report, coupled with ongoing geopolitical tensions and the lack of clear Fed guidance, suggest that USD stability is more probable over the summer.
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