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US dollar falls ahead of today's release of CPI index
All eyes are on today's release of the US CPI index and the Federal Reserve Bank meeting minutes.
“US dollar falls ahead of today’s release of CPI index and FRB meeting minutes”
All eyes are on today’s release of the US CPI index and the Federal Reserve Bank (FRB) meeting minutes. Yesterday, the US dollar fell against most major currencies and continues to decline today.
With no clear indicators of the dollar’s weakness, the market may not be eager to enter long positions ahead of the release of the March US CPI Consumer Price Index today.
The CPI index is predicted to decrease to 5.2% from 6.0% YoY overall, but the core index is expected to rise to 5.6% from 5.5% YoY.
The overall decrease in inflation is believed to be due to a fall in prices for volatile assets such as crude oil.
Following strong US employment statistics, even a slight increase in basic price pressure could make a 0.25% rate hike at the next FRB meeting more credible. However, it may not be enough to dispel speculation of a rate cut by the end of the year.
According to FF interest rate futures, the market is currently pricing in a rate cut of 0.5% or more by December.
As the minutes of the previous FRB meeting are also released today, the market is expected to seek clues on the future direction of the FRB. However, recent market trends have focused on reconfirming their own views, despite data and opinions that go against indications of a change in FRB direction.
Therefore, even if the minutes do not suggest a rate cut for the rest of the year, the market may not pay much attention.
Therefore, while there is a possibility that the US dollar may rise somewhat, it is unlikely to be a sign of a complete recovery.
Conversely, if the CPI core index falls below expectations and the minutes suggest a rate cut until the end of the year, the US dollar may fall further, particularly against the euro.
The ECB is expected to continue its interest rate hikes for nearly three consecutive quarters, and the deviation between ECB and FRB policies may push the eurodollar up to its high of 1.1035, updated on February 2nd.
US stock market awaits CPI index and major bank earnings
Meanwhile, yesterday’s US stock market traded mixed as it awaited Q1 earnings reports, with caution about how much the US CPI index will affect the FRB’s future policies.
On Friday of this week, major banks such as Citigroup, JP Morgan, and Wells Fargo are scheduled to report earnings, providing an excellent opportunity for the market to assess the severity of the banking crisis.
Overall, S&P 500 total earnings are predicted to decrease by 5.2% YoY, with a downward revision from the 1.4% growth at the beginning of the quarter.
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