USD: Powell takes the stage – ING

The dollar has been modestly stronger since the start of the weekend but there was nothing close to an earthquake in markets following the French election result, and FX volatility has continued to fall from its mid-June peak, ING’s FX strategist Francesco Pesole notes.

DXY hovers around 105.00 ahead of the CPI report Thursday

“Today’s highlight is Federal Reserve (Fed) Chair Jerome Powell’s testimony to the Senate, which will be replicated in the House tomorrow. It won’t be easy to extract relevant policy comments amid the often not so relevant questions by policymakers, and the market impact will be concentrated around the release of opening remarks.

“We stand by our view that if there is any deviation from the recent narrative, it should be on the dovish side, as Powell might see the June Dot Plot revisions as too hawkish and want to fine-tune communication on the back of recent data.”

“On the data side, we’ll keep a close eye on June’s NFIB Small Business Optimism index and on the hiring plans index, which tends to lead the month-on-month change in private payrolls by three months. We see DXY hover around 105.00 into the CPI risk event on Thursday, with any dovish surprises from Powell potentially being offset by EU political concerns.”