Upside risks for inflation to limit the downside potential in USD – Commerzbank
After the Dollar was sold off last week it was able to recover a little on Monday. Economists at Commerzbank analyze USD outlook.
Focus will probably be on comments by Fed members
Neel Kashkari, President of the Minneapolis-Fed, said that he did not want to overreact to one job report. It would require the publication of further sets of data to illustrate that inflation really was moving in the right direction. It was premature to declare the end of rate hikes at this stage. He preferred over-tightening rather than doing too little, and he was concerned that inflation might tick up again.
Inflation data from the US is due next week. Until then things look rather quiet on the data front. That is why focus will probably be on comments by other Fed members. To what extent will other members share Kashkari’s views and how many members will echo the recently more dovish comments by Fed Chair Jay Powell?
Principally the market could increasingly come to the conclusion that it should wait for further data publications and that the upside risks for inflation are still quite high at present. That is likely to limit the downside potential in USD for now.
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FXStreet Insights Team
FXStreet
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