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Dollar outlook hinges on upcoming US data as Fed odds shift

MUFG says trimmed Fed tightening expectations were driven by softer PPI and labor data, even as inflation stays above target and December hike odds remain elevated.

Reported · Written up by our desk · Central Banks

FXStreet cited MUFG analysts saying the US Dollar’s outlook will depend heavily on a slate of upcoming economic data, with markets watching how restrictive Federal Reserve policy may need to remain.

The analysts pointed to softer PPI and labor market figures that have reduced near term Fed tightening expectations, but they also argued that inflation is still above target, keeping December hike odds elevated.

They added that industrial production and PMI surveys will help gauge whether current policy restrictiveness is sufficient for bringing inflation down.

FXStreet also noted that the US Dollar was under pressure after disappointing retail sales data, contributing to moves in major pairs and supporting a rebound in gold as rate hike bets for September were scaled back.

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