The US Dollar (USD) has found some support ahead of today's US Consumer Price Index (CPI) data. ING economists analyze the outlook for the dollar.
An underlying CPI at 0.3% can help the dollar
February inflation figures are expected to show a flattening of headline inflation at 3.1% yoy and, more importantly, a slowdown in the core rate from 0.4% to 0.3% mom and 3.9% to 3.7% yoy .
Our economists agree that we will see a consensus figure of 0.3% month-on-month. Great downward volatility is expected for the Dollar if we see a data of 0.2% month-on-month. Unlike the US jobs data, this would reinforce the disinflation optimism shown by Fed Chair Jerome Powell last week and push markets to add 5 basis points to the price valuation of a cut in June, as well as adding expectations of a move in May.
If we are correct with our 0.3% forecast, we may not see much of an impact on the market today, but it could certainly set the tone for a more defensive stance on currencies – i.e. a gradual rotation back towards the Dollar – ahead of next week's FOMC meeting.
We expected this to be the week of stabilization or moderate recovery for the Dollar, and we continue to see a balance of risks to the upside for the Dollar in the coming days, with the possibility of returning to the 103.00/103.50 zone in the index. DXY dollar.
Source: Fx Street
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