USD likely to quickly reverse yet again its losses if CPI surprises strongly like last time – Credit Suisse


The immediate matter of interest is today’s June CPI data – which is tough to trade in the FX space, in the opinion of economists at Credit Suisse.

A “weak” number would allow the market to toy with the idea of pricing in no further hikes after this month

The bottom line is that if the number surprises strongly like last time, the USD is likely to quickly reverse yet again its losses of the past week as the market prices more aggressively for more Fed hikes in September and beyond. Conversely, a number that can be termed ‘weak’ would allow the market to toy with the idea of pricing in no further hikes after this month, compared to the roughly 40% chance of a further 25 bps after this month’s hike now priced in. 

From our perspective, EUR/USD is still too far from the upper end of our expected Q3 1.0500-1.1250 range (same as Q2) to make a short trade a good risk/reward one, even if we tend to line up on the side of upside CPI surprises. Similarly, at around 140, USD/JPY is not yet close enough to the extremes of our expected Q3 range of 135-152 to present a compelling case to buy. While frustrating, we feel it is best to stay focused on trade location at a time of high sensitivity to individual data points.

See – US CPI Banks Preview: Inflation to step meaningfully lower in June

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD clings to modest recovery gains above 1.0700

EUR/USD clings to modest recovery gains above 1.0700

EUR/USD clings to small recovery gains above 1.0700 on Monday following the previous week's slide. European political uncertainty continues to undermine the Euro and cap the pair's upside, while the US Dollar consolidates recent gains amid a tepid market mood. 

EUR/USD News

GBP/USD remains pressured below 1.2700 amid cautious mood

GBP/USD remains pressured below 1.2700 amid cautious mood

GBP/USD stays on the back foot and trades below 1.2700 in the second half of the day on Monday. The hawkish Fed expectations and a softer risk tone keep the US Dollar afloat, exerting downward pressure on the pair. Fedspeak remains next in focus. 

GBP/USD News

Gold retreats below $2,320 as US yields rebound

Gold retreats below $2,320 as US yields rebound

Gold struggles to build on Friday's gains and trades in the red below $2,320 on Monday. The benchmark 10-year US Treasury bond yield rebound above 4.25% following last week's slide, making it difficult for XAU/USD to gain traction.

Gold News

XRP stuck below $0.50 as Ripple CLO says SEC has abandoned demand for $2 billion fine

XRP stuck below $0.50 as Ripple CLO says SEC has abandoned demand for $2 billion fine

XRP struggles to make a comeback above sticky resistance at $0.50 on Monday as traders continue to assess the legal skirmishes between blockchain firm Ripple and the US Securities and Exchange Commission (SEC).  

Read more

Five fundamentals for the week: French opinion polls, US Retail Sales and Bank of England eyed Premium

Five fundamentals for the week: French opinion polls, US Retail Sales and Bank of England eyed

Politics is back, with elections in France rocking markets. US Retail Sales and flash PMIs will provide insights into America's slowdown. The Bank of England announces its decision after all-important CPI data.

Read more

Forex MAJORS

Cryptocurrencies

Signatures