US CPI data is due to be released today at 12:30 GMT. So far this Tuesday, the US Dollar has remained on the defensive, weighed down by risk trades seen on Wall Street indices overnight. Investors are cheering forecasts that the Federal Reserve’s monetary policy tightening is coming to a stop, with the US Consumer Price Index data expected to be lower than the previous month’s readings.

The market participants are looking for clues to what will be the Feds interest rate decision on Wednesday. US CPI is thus the most anticipated data in that regard. Softer-than-expected US CPI data is anticipated to trigger a further decline in the US Dollar, implying that more Fed tightening is off the table later this year, following the pause in rate hikes in June. The Fed’s dovish outlook may boost gold bulls, bringing them back near the $2,000 mark. In contrast, the above predicted prints, particularly the core monthly CPI figure, will re-establish expectations for rate hikes when the Fed decides to skip this week. Markets are currently pricing an 81.5% chance of a Fed rate hike pause on Wednesday, while rate hike bets for the July FOMC meeting are approximately 60%.

US Dollar Index has so far been falling today.

Meanwhile, Former Dallas Fed President Kaplan says the FOMC will take a ‘hawkish pause’ in June and that a raise in July is still possible. A hawkish pause will strengthen USD especially if CPI data is downbeat today.

In a slightly less significant but still a market mover for GBPUSD, the UK unemployment figures are to be released at 06:00 GMT.

Leave a Reply

Your email address will not be published. Required fields are marked *