US Dollar Index may consolidate around current levels – ING

The US Dollar Index (DXY) stays relatively quiet above as focus shifts to Consumer Price Index (CPI) data. Economists at ING expect the dollar to stabilize around current levels.

Another acceleration in headline inflation

“June’s headline inflation is widely expected to have accelerated again. Our economics team expects an 8.7% year-on-year reading, as prices of gasoline, food, shelter and airline fares have all continued to rise. The core rate may instead decelerate to 5.8% from 6.0% YoY. Barring a sizeable contraction in inflation measures, it appears likely that today’s numbers will do very little to dent the market expectations of a 75 bps Fed hike in July.”

“We think the dollar could remain mostly a function of global dynamics today. With China’s covid numbers rising again, we suspect markets will stay mostly on the defensive side, and the dollar may consolidate around current levels.”

“But if we see a break below parity in EUR/USD (a very big CPI figure could be the trigger), then we should see a ripple effect (dollar positive) across many USD crosses.”  

See – US CPI Preview: Forecasts from 11 major banks, new peak but at headline