DXY Trades Flat as Markets Wait for US Inflation Data

The US Dollar Index (DXY) has been trading flat ahead of the release of the United States Consumer Price Index (CPI) data on Thursday. The index, which measures the value of the Greenback against six major currencies, has been stuck at around 99.85.

Strategists at Brown Brothers Harriman believe that markets are in a holding pattern until the CPI report is released. They expect US July CPI to firm modestly but stop short of signaling a renewed acceleration in inflation, with headline CPI forecast to rise +0.1% m/m and ease to 3.4% y/y.

According to BBH, a soft US CPI would strengthen the case for a dovish repricing in Fed hike expectations and further undermine the USD while lifting risk assets. Conversely, a hot US CPI will likely deliver a knee-jerk USD bounce via higher front-end yields.