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Forecasting the upcoming week: US CPI and Warsh testimony to test the Dollar’s recovery

The upcoming week will bring a major test for the US Dollar (USD), with investors focusing on the United States Consumer Price Index (CPI), Federal Reserve (Fed) Chair Kevin Warsh’s congressional testimony and a broad set of activity indicators. China’s second-quarter Gross Domestic Product (GDP) and the Bank of Canada’s (BoC) interest-rate decision will also attract significant attention.

The US Dollar Index (DXY) trades near 101.00, recovering from a one-week low hit earlier on Friday as investors balance softer recent labor market data against renewed geopolitical uncertainty and persistent inflation concerns. Tuesday’s US CPI report will be the central event for the Greenback.

Headline CPI is expected to decline 0.1% MoM in June, following a 0.5% increase in May, while annual inflation previously stood at 4.2%. Core CPI is forecast to rise 0.3% MoM, up from 0.2%, while the annual core rate is expected to remain unchanged at 2.9%.

On another note, Fed Chair Warsh will testify on Tuesday and Wednesday, giving markets an opportunity to assess how policymakers balance elevated inflation against signs of weaker hiring. Comments from several Fed officials and the release of the Beige Book will provide additional guidance.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.12%0.07%-0.42%-0.08%-0.17%-0.14%0.21%
EUR-0.12%-0.05%-0.54%-0.19%-0.30%-0.27%0.09%
GBP-0.07%0.05%-0.50%-0.13%-0.25%-0.23%0.13%
JPY0.42%0.54%0.50%0.34%0.25%0.25%0.60%
CAD0.08%0.19%0.13%-0.34%-0.10%-0.08%0.27%
AUD0.17%0.30%0.25%-0.25%0.10%0.02%0.35%
NZD0.14%0.27%0.23%-0.25%0.08%-0.02%0.34%
CHF-0.21%-0.09%-0.13%-0.60%-0.27%-0.35%-0.34%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

EUR/USD trades lower near 1.1420, retreating as the US Dollar recovers from its weekly low, and is set to finish the week with a 0.19% loss. The pair will remain highly sensitive to US CPI and Warsh’s testimony, while the European calendar includes industrial production and final inflation figures.

GBP/USD trades near 1.3400, with a weekly gain of around 0.34% after reaching a three-week high. The Pound Sterling (GBP) faces an important domestic calendar, with United Kingdom (UK) GDP, industrial production, and manufacturing output due on Thursday. UK GDP is expected to grow 0.1% MoM in May, following a 0.1% contraction. Industrial production is forecast to rise 0.1%, while manufacturing production is expected to decline 0.1% after increasing 0.4% previously.

USD/JPY trades lower near 161.70 on Friday but is set to close the week with a 0.24% gain. The pair will remain driven by US Treasury yields, Fed expectations, and concerns over possible intervention by Japanese authorities. A hotter-than-expected US CPI report could lift yields and revive upward pressure on USD/JPY. Softer inflation could extend the pair’s decline and offer further support to the Japanese Yen.

AUD/USD trades slightly higher near 0.6950, supported by a softer broader US Dollar backdrop and recent strength in the Chinese Yuan. However, the Aussie’s direction next week will depend heavily on Chinese economic data and US inflation. Wednesday’s Chinese GDP report is expected to show the economy expanding 4.4% YoY in the second quarter, slowing from 5%. Quarterly growth is forecast at 0.9%. Industrial production is expected to rise 4.7%, while retail sales are projected to decline 0.1% YoY.

USD/CAD trades lower near 1.4150 ahead of Wednesday’s Bank of Canada policy decision. The BoC is expected to leave its benchmark rate unchanged at 2.25%. The accompanying Monetary Policy Report, policy statement and press conference will be closely examined for guidance on inflation, domestic demand and future rate moves. A hawkish message could extend USD/CAD’s decline, while a cautious stance may limit the Canadian Dollar’s strength.

West Texas Intermediate (WTI) Oil trades muted near $71.60 per barrel as investors assess the risk of renewed supply disruptions linked to tensions between the United States and Iran. Oil prices could become more volatile if diplomatic efforts deteriorate further or concerns surrounding Middle Eastern supply routes intensify. However, signs of weaker global demand, particularly from China, may limit gains.

Gold trades lower near $4,102, losing ground as the US Dollar recovers and investors prepare for the US inflation report. The precious metal remains supported by geopolitical uncertainty, although higher Treasury yields could create additional pressure.

Anticipating economic perspectives: Voices on the horizon

Monday, July 13:

  • Fed's Bowman
  • Fed's Waller
  • ECB’s Schnabel
  • BoE's Pill

Tuesday, July 14:

  • Fed's Warsh
  • Fed's Barr
  • Fed's Goolsbee
  • Fed's Cook
  • Fed's Bowman
  • BoE's Bailey

Wednesday, July 15:

  • Fed’s Williams
  • Fed's Chair Warsh
  • ECB’s Nagel
  • Fed's Cook
  • Fed’s Musalem

Thursday, July 16:

  • Fed’s Logan
  • Fed’s Schmid
  • Fed's Jefferson

Friday, July 17:

  • ECB’s Cipollone

Central banks’ meetings and upcoming data releases to shape

The main monetary-policy event will be the Bank of Canada interest-rate decision on Wednesday, July 15. The central bank is expected to leave its policy rate unchanged at 2.25%.

The BoC will also publish its Monetary Policy Report and policy statement, followed by a press conference. No interest-rate decisions are scheduled from the Fed, ECB, BoE, BoJ, RBA or RBNZ.

Author

Agustin Wazne

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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