US Dollar Index to hold near its recent highs of 107 on firm CPI data – ING
08.08.2022, 07:15

US Dollar Index to hold near its recent highs of 107 on firm CPI data – ING

The dollar starts the new week on the firm side after some impressive US July jobs figures on Friday. Firm US July CPI data this week can see the dollar continue to trade near its highs, economists at ING report.

Dollar to hold near highs, but interest in carry could emerge

“Pricing in the US money markets now sees a further 125 bps of Fed hikes this year (we see hikes of 50 bps, 50 bps, and 25 bps in September, November and December). And those money markets price in around 50 bps of cuts from summer '23 onwards. Current pricing is consistent with our house view and perhaps could usher in a period of calm for Fed pricing and the dollar. That pricing looks unlikely to be altered much this week with a strong US July CPI, where the core rate should stay near 6% year-on-year and keep the Fed concerned. 

“There should be focus this week on the Senate's approval of what is now called the Inflation Reduction Act. It will be interesting to see whether new taxation on stock buybacks next year triggers a rush of stock buybacks this year – potentially supporting US equities (and probably the dollar) into year-end.”

“Expect DXY to hold near its recent highs of 107. But if the dollar is not going anywhere in a hurry, there could be renewed interest in the carry trade.”

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