USD Loses Safe-Haven Bid
The US Dollar has come back under selling pressure over the last 24 hours as market focus has rotated away from optimism around potential tariff negotiations in the wake of fresh US tariffs on China. Trump has pushed ahead with further tariffs on China while warning that additional action can and will be taken unless China backs down and reverses the countermeasure tariffs it announced in response to last week’s US tariff announcement. Safe-haven flows have been diverted to other assets such as gold, JPY and CHF in the wake of the additional tariffs, thwarting the recovery in USD.
Inflation & Fed Expectations
The US Dollar is also weakening today ahead of tomorrow’s keenly awaited US CPI print. The forecast is for headline inflation to have cooled again last month, which should cement near-term Fed easing expectations if confirmed. Market pricing for a cut as early as next month is currently around the 40% level. However, a fresh drop in inflation tomorrow could see this pricing jumping above the 50% mark, leading to a fresh leg lower in USD. Any surprise upside in tomorrow’s CPI reading, however, should help underpin USD here and could turn the focus towards the anticipated inflationary risks linked to Trump’s trade war. In this scenario, USD is vulnerable to a squeeze higher.
Technical Views
DXY
The sell off in DXY has stalled for now into the 101.91 level though the recovery has failed to break back above 103.40. While the market holds below that level, focus is on a continuation lower with 100.38 the next downside target for bears, in line with falling momentum studies readings.
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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.