US Dollar Index Treads Water Amid Slumping Rate Hike Odds
The US Dollar Index (DXY) is trading near the lower end of its recent range as implied odds of a September Fed rate hike decrease. According to Brown Brothers Harriman's (BBH), cooling United States Consumer Price Index (CPI) and Producer Price Index (PPI) in July have cut the chances of a rate hike to nearly 30%, the lowest since June 17.
The USD index has been range-bound between 99.50-100.00, with no significant changes expected from upcoming US retail sales and University of Michigan sentiment data. These releases are seen as unlikely to alter Fed funds futures pricing, which suggests that the FOMC participants are more divided over inflation than growth.
The July retail sales report is expected at 0.1% month-over-month (m/m) compared to 0.2% in June, while control-group sales, excluding cars, gas, food services, and building materials, are seen rising 0.3% m/m vs. 0.5% in June.
The August University of Michigan sentiment survey is also expected, with long-term inflation expectations remaining unchanged at 3.3% for a third straight month.