Mixed CPI Data: What Will Drive the Dollar Next?
Labor Data Drove USD Rollercoaster
The USD experienced a volatile week driven by conflicting labor market signals. An unexpected drop in job openings initially weighed on the USD, fueling expectations of a more dovish Fed. While the NFP report showed softer-than-forecast job growth, the surprise decline in the unemployment rate to 4.2% triggered a sharp USD rebound. Markets were at the time pricing a 75% chance of a 25 bps rate cut, and 25% chance of a 50 bps cut.
Mixed Inflation Data Fuels Uncertainty
Freshly released CPI data paints a mixed picture of inflation. While the annual rate cooled more than anticipated to 2.5%, the uptick in core CPI to 0.3% suggests underlying price pressures persist. This mixed bag is likely to keep the Fed on its toes, adding another layer of complexity to the interest rate outlook.
Dollar Firms on Core CPI, Fed Next Week
The dollar gained strength on the higher-than-expected core CPI, and markets price in an 85% chance of a 25 bps Fed rate cut. This suggests a less dovish Fed than previously anticipated, which could support further dollar strength in the near term. However, the Fed's policy decision next week remains crucial for confirming this outlook.
ECB Decision in Focus
All eyes are on the ECB's rate decision tomorrow. While a 25 bps cut is expected, Lagarde's tone on future policy will be key. Hints of a pause in easing could boost the euro, while continued dovishness might weigh on it. We expect the ECB to signal a wait-and-see approach until the Fed's move, keeping the euro relatively strong by emphasizing its focus on inflation.
Possible Outcomes
The mixed inflation data has left the dollar's path uncertain, making the ECB rate decision a potential turning point for EURUSD.
Hawkish ECB - If the ECB surprises with a more hawkish stance than expected, the euro could strengthen, potentially pushing EURUSD above the 1.1100 level and possibly even higher.
Dovish ECB - A dovish outlook from the ECB, coupled with the dollar's recent strength, could push EURUSD back below 1.1000, potentially close to the 1.0950 level.
The market is on edge, and the ECB's decision tomorrow will likely be the catalyst for the next significant move in EURUSD.
The USD experienced a volatile week driven by conflicting labor market signals. An unexpected drop in job openings initially weighed on the USD, fueling expectations of a more dovish Fed. While the NFP report showed softer-than-forecast job growth, the surprise decline in the unemployment rate to 4.2% triggered a sharp USD rebound. Markets were at the time pricing a 75% chance of a 25 bps rate cut, and 25% chance of a 50 bps cut.
Mixed Inflation Data Fuels Uncertainty
Freshly released CPI data paints a mixed picture of inflation. While the annual rate cooled more than anticipated to 2.5%, the uptick in core CPI to 0.3% suggests underlying price pressures persist. This mixed bag is likely to keep the Fed on its toes, adding another layer of complexity to the interest rate outlook.
Dollar Firms on Core CPI, Fed Next Week
The dollar gained strength on the higher-than-expected core CPI, and markets price in an 85% chance of a 25 bps Fed rate cut. This suggests a less dovish Fed than previously anticipated, which could support further dollar strength in the near term. However, the Fed's policy decision next week remains crucial for confirming this outlook.
ECB Decision in Focus
All eyes are on the ECB's rate decision tomorrow. While a 25 bps cut is expected, Lagarde's tone on future policy will be key. Hints of a pause in easing could boost the euro, while continued dovishness might weigh on it. We expect the ECB to signal a wait-and-see approach until the Fed's move, keeping the euro relatively strong by emphasizing its focus on inflation.
Possible Outcomes
The mixed inflation data has left the dollar's path uncertain, making the ECB rate decision a potential turning point for EURUSD.
Hawkish ECB - If the ECB surprises with a more hawkish stance than expected, the euro could strengthen, potentially pushing EURUSD above the 1.1100 level and possibly even higher.
Dovish ECB - A dovish outlook from the ECB, coupled with the dollar's recent strength, could push EURUSD back below 1.1000, potentially close to the 1.0950 level.
The market is on edge, and the ECB's decision tomorrow will likely be the catalyst for the next significant move in EURUSD.
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إخلاء المسؤولية
لا يُقصد بالمعلومات والمنشورات أن تكون، أو تشكل، أي نصيحة مالية أو استثمارية أو تجارية أو أنواع أخرى من النصائح أو التوصيات المقدمة أو المعتمدة من TradingView. اقرأ المزيد في شروط الاستخدام.