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USD: Inflation and Jerome Powell are in focus this week – ING

The dollar is modestly stronger after the weekend as a surprise victory for the left-wing alliance in France’s second-round legislative elections sent European currencies lower and fueled some safe-haven demand, with the Japanese Yen (JPY) and Swiss Franc (CHF) higher, suggests ING analyst Francesco Pesole.

Inflation and Powell will boost the market

“This week will be busy for US macroeconomic data, with the June CPI report due on Thursday. We expect the core figure to come in at 0.2% month-on-month, in line with consensus, which should be enough to keep markets betting on a September rate cut, which is now priced in at 83% (19bp).”

“We are also seeing the valuation for full easing in 2024 starting to move above 50bp again. The weakening trend in the US labor market, in our view, will push the FOMC to deliver three cuts this year, starting in September. Also expected this week is Fed Chair Powell’s testimony before Congress (Tuesday-Wednesday), which we expect to be dovish after an overly hawkish revision to June’s dot-plot projections.”

“Overall, we expect the macroeconomic story to continue to point to a USD decline, but political developments in the Eurozone and US mean that only a few currencies may benefit from this. By extension, downside risks for the DXY index may be relatively limited. Today’s US data calendar is fairly quiet with no FOMC speakers scheduled.”

Source: Fx Street

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