USD Volatility Ahead of Pivotal CPI Print
The US Dollar (USD) experienced volatility last week due to Japan's Bank of Japan repricing its monetary policy stance, causing USD weakness. However, solid August nonfarm payrolls revived expectations for a September Federal Reserve hike, leading to a partial recovery in the USD.
Elias Haddad from Brown Brothers Harriman notes that US inflation data will be pivotal for the Fed's next move and for USD direction. The US Consumer Price Index (CPI) print on Friday, September 16, will determine whether a September Fed funds rate hike is likely.
A hot CPI print would seal a September hike and underpin a firmer USD. However, even if a September Fed hike becomes a done deal, Haddad doubts the USD will reach new cyclical highs due to tightening by other major central banks limiting policy divergence.