US Inflation (CPI) briefing, Dollar Index remains south of 200-Day SMA

It was a reasonably quiet session for the US dollar on Monday, eking out a modest gain against major peers, according to the US Dollar Index.

For those who missed the research team’s latest technical report, here is a reminder of the USD’s current position on the daily timeframe:

If sellers can maintain position south of the 200-day SMA, this is likely to remain a sellers’ market, with swing (and short-term) traders perhaps selling into any rallies and targeting 102.36 support structure.

(TradingView—US Dollar Index Daily Timeframe)

Macro-Packed Week

We have a busy week ahead in the macro space, kicking off with US consumer price inflation for November (Consumer Prices Index [CPI]) on Tuesday, a day ahead of the FOMC meeting on Wednesday which is widely anticipated to see a 50 basis-point increase, bringing the Federal Funds target range to between 4.25% and 4.5%.

The target rate probabilities, according to the CME’s FedWatch Tool, shows a 72.3% probability of a 50 basis-point hike over a 27.7% chance for a 75 basis-point increase. A 50 basis-point move will represent a deceleration from the four successive 75 basis-point increases as the central bank attempts to rein in spiralling inflation. We will also see the FOMC’s Summary of Economic Projections, consisting of projections for inflation and economic growth over the next two years, as well as the FOMC member’s forecasts for the Fed Funds rate. It is expected that the terminal dot plot will be lifted to around 5.0%.

In addition to US data, the Bank of England (BoE), the European Central Bank (ECB) and the Swiss National Bank (SNB) are all set to raise their respective interest rates by 50 basis points on Thursday.

US Inflation CPI Eyed at 1:30 pm GMT

Annual US inflation has noticeably slowed to 7.7% in the four months since pencilling in what appears to be a peak at 9.1%.  According to the Bloomberg median estimate, inflation is anticipated to slow once again to 7.3%, though do be aware that the survey range falls between 7.5% and 7.2%. Therefore, a miss or beat outside of this range could spark some strong dollar moves. Higher than the forecast range is likely to see the US dollar rally and equities take a hit, and vice versa for a miss below 7.2% could have the buck sell-off and equities catch a strong bid.

(Bloomberg)

Core inflation, which excludes food and energy, is also anticipated to soften to 6.1% in November following October’s 6.3% reading, according to Bloomberg’s median estimate. The survey range resides between a high of 6.3% and a low of 6.0%. Again, much like the headline print noted above, the forecast range will be a key watch.

Distribution of economists’ forecasts:

(Bloomberg)

Month-over-month US inflation data is expected to slow to 0.3% in November, according to Bloomberg’s median estimate. This follows October’s 0.4% print. The survey forecast range is between a high of 0.4% and a low of -0.1%.

(Bloomberg)

According to the Federal Reserve Bank of Cleveland’s Inflation Nowcast, they see November’s headline inflation print at 7.49% and 6.26% for the core reading.