US Dollar Index: Range-bound Dollar as Fed odds ease – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes the USD index (DXY) is trading near the lower end of its recent 99.50–100.00 range as cooling United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) have cut implied odds of a September Fed rate hike. Upcoming US retail sales and University of Michigan sentiment data are seen as unlikely to materially alter Fed funds futures pricing.

Dollar holds in tight DXY range

"The USD index (DXY) is trading near the lower end of this month’s tight 99.50-100.00 range. Cooling US CPI and PPI inflation in July trimmed the implied odds of a Fed rate hike in September to nearly 30%, the lowest since the June 17 FOMC decision. That is keeping USD in check and lifting risk appetite despite the ongoing US-Iran conflict."

"Today’s US data releases are unlikely to shift the dial on Fed fund futures pricing. FOMC participants are more divided over the durability of the inflation threat than on the US growth outlook."

"July retail sales report (1:30pm London, 8:30am New York). Total retail sales are expected at 0.1% m/m vs. 0.2% in June. The policy relevant control-group sales - which exclude cars, gas, food services, and building materials – is seen rising 0.3% m/m vs. 0.5% in June. That would be consistent with resilient real consumer spending activity given that headline CPI rose 0.1% m/m in July."

"August University of Michigan sentiment survey (3:00pm London, 10:00am New York). Long-term inflation expectations are expected to remain unchanged at 3.3% for a third straight month."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)