FOREX
The US dollar was trading flat as the European trading session got underway. Investors are sitting tight for the moment, awaiting the release of US inflation data later in the day. Last week, the Federal Reserve hiked rates for the tenth consecutive time, a move that was seen by many as the last chapter of the current tightening cycle. Against this background, today’s release of inflation data could provide even more substance to investors' belief that the US central bank will pause and perhaps even open the door for a rate cut before the end of the year. Recent data releases have shown a resilience in the US economy which surprised some, reducing the chances of a rate cut in 2023 and highlighting the importance of today’s inflation numbers. However, a clear slowdown in core inflation would create some scope for a rate cut in 2023; so, a CPI number surprising to the downside is likely to trigger dollar weakness as investors would quickly price-in the shift in expectations.
Ricardo Evangelista – Senior Analyst, ActivTrades
The US dollar was trading flat as the European trading session got underway. Investors are sitting tight for the moment, awaiting the release of US inflation data later in the day. Last week, the Federal Reserve hiked rates for the tenth consecutive time, a move that was seen by many as the last chapter of the current tightening cycle. Against this background, today’s release of inflation data could provide even more substance to investors' belief that the US central bank will pause and perhaps even open the door for a rate cut before the end of the year. Recent data releases have shown a resilience in the US economy which surprised some, reducing the chances of a rate cut in 2023 and highlighting the importance of today’s inflation numbers. However, a clear slowdown in core inflation would create some scope for a rate cut in 2023; so, a CPI number surprising to the downside is likely to trigger dollar weakness as investors would quickly price-in the shift in expectations.
Ricardo Evangelista – Senior Analyst, ActivTrades