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Dollar firms as markets look to US CPI and Fed testimony

WTI pushed above $80 as US-Iran tensions boosted risk premia while investors dialed back expectations for a Fed hike before the US midterms.

Reported · Written up by our desk · Major Pairs

Foreign exchange markets were relatively calm and rangebound ahead of the US CPI release, with traders focusing on how inflation data and upcoming Fed remarks could shift expectations for the timing of any rate move, according to Forexlive.

Oil prices continued to rise, with WTI moving above the $80 level as escalating US-Iran tensions revived fears of additional supply disruptions, and the market kept pricing in a higher geopolitical risk premium tied to the Strait of Hormuz.

Bank of America’s July Fund Manager Survey showed positioning becoming unusually one-sided, with 54% of respondents expecting “no landing” and 2% expecting a “hard landing.” The same commentary said 83% of investors were not expecting a Fed rate hike before the November midterms.

In the run-up to the American session, attention was set on expectations for headline and core CPI, plus Fed Chair Warsh testimony, with Forexlive noting that the key datapoint for rate timing would be the core CPI month over month figure expected at 0.2%. The piece also cited comments that Fed officials were prepared to consider hikes based on inflation progress, including a view that the day’s CPI read could be sufficient for a July vote if results beat forecasts.

Latest closeWTI crude $78.04 ▲9.3%

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