All Eyes On US CPI Today
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USD On Watch
All eyes are on the US Dollar today as traders brace for the latest set of US inflation figures. Market pricing for a rate hike from the Fed next week has risen to just shy of 70% from around 58% at the start of the week on the back of last Friday’s NFP upside surprise. The lift in hawkish expectations this week is likely a function of the breakout move we’ve seen in oil this week with crude back above $100 p/b as the conflict in the Middle East intensifies. Higher oil prices are feeding into resurgent inflation fears and, for USD, higher bond yields amidst an uptick in safe-haven demand. Against this backdrop, the focus is now on today’s inflation figures which are seen as make or break for a hike next year.
Today’s CPI Expectations
On the numbers front, the market is looking for headline annualised CPI to remain unchanged at 3.4%. Given that inflation is still well above the bank’s 2% target, though down from May’s highs of 4.2%, it would likely a heavy downside surprise to dent rate hike expectations and take USD lower. Instead, if inflation is confirmed at 3.4%, or indeed above, this should see rate hike expectations move above 80%, lifting USD accordingly and causing ripple effects throughout markets into next week.
Technical Views
DXY
The index looks to be carving out a double bottom against the 98.50 lows with nice bullish divergence in momentum studies. Above 99.15 focus turns back to the 100 level next and a retest of the broken bull channel lows. To the downside, 97.97 remains the key support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.