The dollar falls back awaiting a rebound in general inflation. Scotiabank economists analyze the prospects of the dollar.
The moderation in underlying prices should moderate the impact on the USD
The monthly increase in inflation is expected to be moderate, at 0.2% month-on-month, but the pace of headline inflation is expected to increase from 3.0% in June to 3.3%. Core prices will also rise 0.2% per month but should slow to 4.7% (from 4.8%) per year.
Assuming an increase of 0.2%m/m by the end of the year, core CPI should slow further in December (to around 3.5%). With tight monetary policy, the Fed will be cautious in tightening.
Markets may find the jump in July headline prices hard to swallow, but the risk of a rally in the coming months has been well signaled and should not surprise market participants too much. The moderation in core prices should soften the impact on the dollar.
The DXY continues to reflect broader selling pressure on the USD in the 102.50/102.75 area, with today’s losses potentially leaving support around 101.75 exposed. Further USD weakness is expected in the coming months. Expect more USD weakness to accumulate below this zone.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
