The US dollar made a strong recovery last week, with GBP/USD falling to a three-week low and EUR/USD reaching its lowest levels since mid-August. This coincided with a substantial decline in the pound, with GBP/EUR falling by more than 1% in response to dovish comments from Bank of England (BoE) Governor Andrew Bailey.
Looking ahead, the US dollar’s recent rise may be tested later this week with the release of the latest US consumer price index.
What is the prognosis for US inflation?
Analysts forecast. Thursday’s CPI numbers will report the headline. In September, US inflation slowed much further.
Headline inflation is predicted to fall from 2.5% to 2.3%, while core inflation remains constant at 3.2%.
However, US inflation has continuously undershot predictions since May, and recent drops in the US producer price index are consistent with lower consumer price pressures.
How might this affect Fed rate-cut bets and the US dollar?
Following Friday’s excellent US payroll report, USD investors expected the Federal Reserve to decrease interest rates by another 50 basis points.
However, if US inflation rises to the downside again in September, it may rekindle betting on another significant rate decrease next month. This is expected to result in a depreciation of the US currency.
A consensus print may also pressure the US currency, given that the Fed has indicated that it is closely monitoring inflation.
On the other hand, a hotter-than-expected inflation print would likely cause USD investors to discount the chances of a more significant rate decrease from the Fed next month, allowing the US currency to sustain its present bullish trend.
If you’re concerned about the possibility of volatility following the release of the US CPI numbers, you might want to learn more about some of the services we provide:
Limit orders: Set the rate you want to attain, and your transfer will be executed automatically if the market rises to that level.
Forward contracts are agreements to fix a rate in advance of a transfer.
Rate notifications – Set a target exchange rate and receive text or email notifications when it is reached.
