Dollar Rises As Inflation Hits 3yr Highs
US CPI Jumps Again
The US Dollar continues to push higher midweek as hot US inflation and a lack of progress in US/Iran peace talks keeps USD in demand. On the inflation front, annualised headline CPI was seen rising to 3.8% from 3.3% prior, last month, above the 3.7% the market was looking for. Now back at its highest level since Q2 2023, inflation is showing no signs of shifting lower anytime soon and Fed tightening expectations were seen rising in response to the release. CME group pricing for an October hike has now risen to above 20% with pricing for a hike by year end above 35%. Given that energy prices remain near highs and are not expected to fall anytime soon, inflationary pressures could easily see CPI above 4% at the next reading. Looking ahead today, focus will be on the latest set of PPI figures which could see tightening expectations rising further if strength is seen in these readings too.
US/Iran Developments
Alongside hotter-than-forecast inflation data, USD is also staying bid through stronger safe-haven demand as traders nervously monitor US/Iran peace talks. Hopes for a deal ahead of Trump’s meeting with Xi this week have been dashed and with rhetoric from both sides turning more hostile again, uncertainty is rising. For now, USD looks likely to drift higher with any hawkish Fed commentary this week seen further supporting demand.
Technical Views
DXY
The Dollar is now testing the falling edge top, probing above 98.24 also. If we break higher here, focus will turn to 99.15 as the next resistance to note ahead of the bigger 100 level above. If we break back below 98.24 near-term, 96.63 is the deeper support level to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.