- DXY remains on the defensive around the 96.80 area.
- Yields bounced to 2.08% in the wake of CPI.
- US Core CPI came in above estimates at 2.1% YoY.
The greenback stays under heavy pressure today despite auspicious prints from US CPI, with daily gains capped by the 97.00 neighbourhood when gauged by the US Dollar Index (DXY).
US Dollar Index ignores data
The index is flirting with the 200-hour SMA in the 96.90 region after US inflation figures tracked by the CPI showed headline consumer prices rose 0.1% MoM and 1.6% on a year to June. Additionally, Core prices surprised to the upside, rising 0.3% MoM and 2.1% on an annualized basis.
Further US data saw weekly Claims rising by 209K and taking the 4-Week Average to 219.25K from 222.50K.
In spite of the positive data releases, the buck looks unable to regain serious traction as investors continue to factor in the likeliness of a rate cut as early as at the July meeting. Whether it will be a 25 bps or a 50 bps rate cut appears to be driving the mood among market participants for the time being and therefore keeping the pressure on DXY unchanged.
Moving forward, Chief Powell will testify before the Senate Banking Committee, NY Fed J.Williams (permanent voter, centrist) speaks in New York, Atlanta Fed R.Bostic (2021 voter, centrist) will speak on Monetary Policy at Fiscal Conference, Richmond Fed T.Barkin (2021 voter, centrist) will speak at Rocky Mountain Economic Summit and Minneapolis Fed N,Kashkari (2020 voter, mega-dovish) speaks at en event in South Dakota.
What to look for around USD
The greenback has given away its weekly gains in response to the more-dovish-than-expected views from Chief Powell and the FOMC minutes. The Fed is now gearing up to cut rates, probably as early as this month’s meeting. Trade tensions and weakness overseas continue to cloud the outlook while concerns over the lack of upside traction in inflation remain unabated. Confronting this scenario, the greenback still looks underpinned by its safe have appeal, the status of ‘global reserve currency’ and solid US fundamentals when compared to its G10 peers.
US Dollar Index relevant levels
At the moment, the pair is retreating 0.14% at 96.95 and a breakdown of 96.80 (low Jul.11) would aim for 96.69 (200-day SMA) and then 96.46 (low Jun.7). On the upside, the next barrier emerges at 97.59 (high Jul.9) followed by 97.80 (monthly high Jun.3) and finally 98.37 (2019 high May 23).
Share
