Only a strong US CPI report will prevent the US Dollar from falling to fresh lows – MUFG

FXStreet Insights Team FXStreet

The US Dollar has continued to weaken at the start of this week. Only a stronger-than-expected US Consumer Price Index (CPI) on Thursday would avoid a slide to fresh lows, economists at MUFG Bank report.

ISM survey heightens US recession risks ahead of US CPI report

“The main trigger for the renewed USD sell-off was the release of the much weaker than expected ISM services survey on Friday that signalled a heightened risk of recession in the US. The scale of weakness signalled by the report has encouraged market participants to scale back expectations for further Fed rate hikes.”

“The combination of heightened US recession fears and falling US yields supports our outlook for the US Dollar to weaken further in the year ahead.”

“Market attention in the week ahead will now quickly switch to the release of the latest US CPI report on Thursday. The risk of a stronger US CPI report could be the only factor that prevents the US Dollar from falling to fresh lows in the week ahead.”

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FXStreet Insights Team

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