The US dollar is struggling ahead of today’s CPI data


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The highlight of the week is finally here with US CPI due to be released at the bottom of the hour.

Here’s the consensus on the headline:

  • +8.7% y/y
  • +0.2% m/m

And core:

  • +6.1% y/y
  • +0.5% m/m

What’s interesting is that the dollar is curiously soft into the data. That might be traders clearing out of the crowded long-USD trade on risks around the report. It’s also notable that there haven’t been warnings from the White House about the data, which some might take as a sign it will be on the low side (if you can consider something a bit less than 8.7% as low).

Last month, the CPI reading was +9.1% compared to +8.6% expected and it led to the market pricing in a 62% chance of 100 bps at the July Fed (up from zero before the report).

On that day, the euro touched parity but only for an instant and then it lept
to 1.0050 and later to 1.0122 before settling back to 1.0056. USD/JPY gained only 56 pips on the day.