USD: Dovish bias can hit the dollar – ING

FXStreet Insights Team FXStreet

Our call is for a consensus 0.2% MoM core CPI in the US on Thursday. But markets should react to the decimal places before rounding, and the distribution of economists’ estimates suggests expectations may be slightly skewed towards a higher number, ING’s FX strategist Francesco Pesole notes.

Short-term risks for DXY appear skewed to 104.50

“Risk sentiment has improved into Thursday’s US June CPI report, perhaps as markets expect the figures to keep the Federal Reserve on track for a September rate cut, which is 20bp priced in. As usual, the market-moving sub-index will be the month-on-month CPI excluding food and energy, which we forecast at 0.2% in line with consensus.”

“The distribution of economists' estimates has a fatter right-end tail, meaning actual expectations are closer to 0.24% than 0.15% (both would be rounded to 0.2%). In year-on-year terms, the consensus number is 3.4% for core inflation, and headline CPI is expected to slow further from 3.3% to 3.1% YoY.”

“We have a slight bias for a weaker US Dollar (USD) today given the market’s recent dovish tendency despite inconclusive evidence for a September cut just yet. We still believe the Euro-heavy DXY index may not show the full extent of a softening of the USD that should primarily benefit high-beta currencies. Still, risks for DXY appear skewed to 104.50 in the very short term.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.