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USD: CPI needed to shake up currency market – ING

Global currency volatility has continued to ease rapidly as markets await developments in Eurozone and US politics, as well as in the data arena. The proximity to Thursday’s key US CPI release may also be behind cautious trading in the FX market this week, notes Francesco Pesole, FX strategist at ING.

US Dollar to hold steady ahead of Thursday’s CPI report

“Today, Federal Reserve Chairman Jerome Powell faces House policymakers in his second testimony, after yesterday’s Senate appearance had little impact on markets. Powell’s prepared remarks focused on two-way risks, reiterating the need for more data to justify monetary easing. So, more of the same rhetoric from Powell, who is content to keep markets relatively calm.”

“The US Democratic Party’s revolt against President Joe Biden appears to have been completely ignored by markets. The Predict index of Biden’s likelihood of being the party’s nominee in November has bounced from 40% to 60% after recent signs that the domestic push to replace him may be insufficient.”

“We expect FX market volatility to remain low today, a development that may favor a further near-term rally in high-carry currencies such as the MXN and BRL, while keeping funding pressure on the Yen high. The Dollar may remain broadly stable until tomorrow’s CPI.”

Source: Fx Street

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