USD: Exploring the softer side – ING
15.08.2024, 09:17

USD: Exploring the softer side – ING

The softer trend in inflation will be music to the ears of the Federal Reserve, ING’s FX strategist Chris Turner notes.

More data for the market to grind

“Core inflation is running at a 1.6% three-month annualised rate. Most of the components of this week's PPI and CPI releases point to an on-target 0.2% month-on-month release of the July core PCE inflation data on 30 August. Markets should now be expecting some dovish commentary coming through from the Fed. And of course, next week's Fed's Jackson Hole Economic Symposium presents an opportunity.”

“Attention squarely shifts to the speed of Fed rate cuts. Yesterday, the Reserve Bank of New Zealand sounded in a hurry to get the 5.50% policy rate down to the neutral 3.00% rate. It only cut by 25bp yesterday but had discussed a 50bp cut. True, New Zealand's economy (small, open) is very different from the US (large, closed), but the RBNZ does show an example that central banks can shift narratives pretty quickly.”

“Activity data will now determine whether the Fed cuts by 25bp or 50bp in September. The August jobs data on 6 September will have a major say here. In advance of that, today sees retail sales for July. The bounce back in auto sales is expected to support the headline number, but the market will focus on the retail sales control group. The market will also be paying close attention to the weekly initial claims.”

 

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