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15 July 2024 | FXGT.com

Dollar Drops to Five-Week Low on September Rate Cut Bets

  • US Dollar Performance: The US Dollar Index (DXY) recently dipped to five-week lows near 104.00, primarily due to declining US yields and an overall improvement in risk sentiment. This shift has ignited speculation about multiple rate cuts by the Federal Reserve.
  • Latest CPI Data: June’s consumer price index (CPI) report revealed a softer-than-expected increase, with the annual inflation rate dropping to 3%—the lowest in over three years. This decline has reinforced market confidence in a potential 25-basis-point rate cut by the Federal Reserve in September, pushing expectations to over 90%.
  • Latest PPI Data: Contrary to the CPI trend, the producer price index (PPI) saw a 0.2% increase in June, exceeding the anticipated 0.1%. Over the past year, PPI has risen by 2.6%. This uptick was driven by higher service prices despite a decrease in goods prices, highlighting a divergence from the recent trend of declining inflation.
  • University of Michigan Survey: The University of Michigan’s Consumer Sentiment Index fell to its lowest level in eight months, missing economists’ expectations. However, the survey did show improved consumer inflation expectations for the second consecutive month, suggesting that consumers are becoming slightly more optimistic about future inflation trends.
  • Upcoming Fed Speeches: Speeches by Fed members Bowman and Bostic on Friday will be closely watched for insights on future policy. Given the limited US data this week, these speeches are particularly important, especially in light of recent soft economic data.
  • Upcoming US Retail Sales: The US retail sales data for June, expected on Tuesday, is forecasted to reflect cooling consumer sentiment. Retail sales are anticipated to remain flat after a slight uptick in May. This data will be scrutinized for any surprises that might influence the dollar’s trajectory and affect market expectations for future Fed rate moves.
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