CPI in Sight

The US Dollar is trading lower today ahead of the upcoming October CPI release this afternoon. On the back of recent Fed commentary, the data is drawing plenty of attention and will be used as a strong benchmark for gauging whether the Fed will hike rates again this year. We heard from a slew of Fed members last week, including Fed chairman Powell who told markets that it was still too early to declare victory on inflation, warning that further tightening would be used if the Fed deemed it necessary.

Market Implications

On the back of those comments, the implications for today’s inflation data are very clear. If CPI is seen sticking around prior levels or making an unexpected move higher, Fed tightening expectations will jump leading USD higher also. On the other hand, if CPI is seen falling in line with projections, this should keep near-term Fed tightening expectations muted, leading USD lower through year end.

Today’s Forecasts

On the numbers front, the market is today looking for monthly CPI to fall to 0.1% from 0.4% on the headline reading and remain unchanged at 0.3% on core. The annualised figure is then expected to drop to 3.3% from 3.7% prior. Data in or below these levels should keep USD weighted near-term while any uptick will see December rate-hike pricing creeping higher.

Technical Views

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DXY

The market remains hemmed in between the 104.95 support and resistance at 107.57. The prior bull trend having paused for two months now, risks of a deeper correction are growing, in line with falling momentum studies readings. If we break below 104.95, 103.48 is the next support to note. 

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