USD Flat as Markets Eye Key Inflation Data This Week

Here’s this week’s overview of the US Dollar:

• In the past week, the US Dollar Index was flat against a trade weighted basket of its peers, up somewhat from lows at the beginning of the month.

• Investors look ahead to key inflation data this week for confirmation that price growth has continued to stabilise at levels acceptable to central bankers. US producer inflation data will be released on Tuesday and consumer inflation figures will follow on Wednesday. US retail sales numbers are also slated for Thursday.

• In the first week of August, the dollar tumbled to a seven-month low as a weak July jobs report stoked US recession fears, with markets speculating on an emergency rate cut from the Federal Reserve.

• The Yen’s rally, fuelled by government interventions and Bank of Japan rate hikes also exacerbated the dollar’s decline.

• Sentiment has since stabilised as US economic data coming after the July jobs report alleviated fears of a downturn, causing the dollar to arrest its downward momentum.

• Markets also dialled back bets on Fed rate cuts, although expectations of over 100 basis points of total easing this year remain intact.