Dollar advances as US inflation data confirms Trump tariff fears
The dollar has advanced against its peers today after the latest US inflation report practically confirmed that President Trump’s tariffs acted to push up consumer prices in June. While there was a mild miss in the core number, both the main and underlying inflation measures are now printing at their highest levels in four months. The big fear for Fed officials is that stormier waters lie ahead, as not only is there a time lag between the tariffs and an increase to prices, but additional tariff hikes on 1st August would almost certainly herald further inflationary pressures ahead.
The president has yet again launched another scathing verbal attack on Chair Powell, today repeating calls for the Fed to slash rates by as much as three percentage points. Yet, with inflation inching upwards again, and the jobs market so far appearing almost immune to Trump’s trade policies, we think that Fed officials will maintain a cautious approach for now, with the next cut appearing increasingly unlikely until at least October.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
