USD: Everyone expects a soft inflation number today – ING
28.06.2024, 10:16

USD: Everyone expects a soft inflation number today – ING

There is a very strong consensus around a 0.1% month-on-month core PCE deflator for May today. Remember this is the Federal Reserve's (Fed) preferred measure of inflation and following a 0.2% MoM prior reading should give the Fed confidence to start cutting rates later this year, Global Head of Markets at ING Chris Turner notes.

US PCE poses downside risks for the US Dollar

“The market does not fully price in the first Fed rate cut until November and thus there should be room for US short-dated rates to drop as focus shifts more squarely to a September rate cut. US two-year Treasury yields have been consolidating just above 4.70% for the last couple of weeks and a 0.1% MoM core PCE on Friday should make them break lower and drag the dollar with it.”

“The challenge, however, is politics. Last night's presidential debate on CNN saw 67% polling awarding the victory to Donald Trump. We see a potential Trump administration as more positive for the dollar both via looser fiscal policy and also via a more aggressive trade/tariff environment.”

“The Dollar Index (DXY) is now hovering around 106 helped in part by the unchecked rise in USD/JPY. Here, the market seems reasonably calm. This makes it more difficult for Japanese authorities to intervene. DXY will face downside risks from the US inflation data, but we suspect it will find buyers in the 105.50/60 region as investors will prefer to hold dollars over the weekend.”

 


 

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