USD: Soft tone holds with CPI in focus – Scotiabank

Scotiabank’s Analyst Team observes that the USD remains soft in broad DXY terms, with index support around 100.5 still intact after last week’s decline. The absence of a rebound suggests the earlier hawkish Fed-driven gains may be fading. Upcoming US inflation data and Warsh’s testimony are seen as key, while risk sentiment remains steady despite US/Iran tensions.

DXY steadies as volatility stays muted

"After the net loss for the DXY last week, the lack of any rebound supports the impression that gains on the back of the “hawkish Fed” narrative may be running out of steam."

"Next week’s data US data reports, including the June run of US inflation data, may be influential in extending that theme as headline CPI at least is expected to moderate."

"There is not much evidence of traders moving out of risk assets and into havens which suggests little concern that geo-political risks could sharpen over the weekend."

"That warrants attention because we are nearing the point in the calendar year where volatility typically picks up—significantly."

"It’s a quiet day for data and there is enough event risk next week—Warsh’s congressional testimony as well as the inflation data—to keep the markets on the quiet side today."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)