US Dollar Index consolidates around 103.70, focus shifts on US inflation

• The DXY struggled above 104.00 and dropped lower modestly.
• The upbeat NFP vs. lower inflation forecasts have confused the market participants.
•  Fed’s Bostic sees interest rates between 2.00-2.50% by the end of 2023.

The US dollar index (DXY) is oscillating in a narrow range of 103.58-103.77 in the Asian session as investors are awaiting the release of the US Consumer Price Index (CPI), which will dictate the further direction of the asset. The US CPI will release on Wednesday and investors are expecting a slippage in the figures. A preliminary estimate for the US CPI is 8.1% against the multi-year high print of 8.5% recorded last month.

Upbeat NFP vs. Lower inflation forecasts

The US Nonfarm Payrolls (NFP) landed at 428k last week. The job additions remained higher than the forecast of 391k, which bolstered the odds of a 75 basis point (bps) by the Federal Reserve (Fed) for June’s monetary policy. On the other side, a lower inflation forecast indicates that recent quantitative measures are barricading the soaring inflation and an occurrence of the same may compel the Fed to adopt not so aggressive hawkish stance. Therefore, investors are in dilemma on betting with or against the DXY, which has turned the asset sideways.

Fed’s Bostic speech

Atlanta Fed President Raphael Bostic said on Monday that the Fed's most recent 50 bps rate hike was an "aggressive" move and that the Fed can stay at this pace, as per his interview at Bloomberg. Fed policymaker sees interest rates in a defined range of 2.0-2.5% by the end of 2023.

Key events this week: Consumer Price Index (CPI), Initial Jobless Claims, Producers Price Index (PPI) Michigan Consumer Sentiment Index (CSI).

Eminent issues on the back boiler: Russia-Ukraine Peace Talks, China’s CPI, and European Central Bank (ECB) President Christine Lagarde’s speech.