Dollar Sees Boost as Fed Policy Uncertainty Persists Amid Soft June CPI
The US Dollar has seen increased policy uncertainty following the softer June Consumer Price Index (CPI) print, which has reduced immediate inflation concerns. According to Geoff Yu from BNY, limited Fed guidance continues to support policy uncertainty and the US Dollar.
The upcoming Federal Open Market Committee (FOMC) decision on Wednesday and Thursday's Personal Consumption Expenditures (PCE) Price Index release are expected to produce significant moves in front-end rates, FX, and risk assets. Yu notes that the FOMC meeting is unusually open to interpretation due to the new Fed leadership offering less forward guidance than markets are used to.
Fed pricing still reflects a one-third chance of a hike and close to two hikes by year end. Yu expects the below-expectation June CPI print to allow the Fed to remain on hold, but notes that the resurgence of conflict might push inflation higher later in the year.