The index attempts some consolidation in the low-113.00s. US yields reverse the recent weakness and move slightly higher. US inflation figures tracked by the CPI takes centre stage on Thursday. The greenback seems to have moved into a consolidative phase in the 113.20/30 band when measured by the USD Index (DXY).
USD index now looks to US CPI
The index navigates the 113.30 region and appears consolidative ahead of the upcoming release of the US CPI for the month of September, all amidst alternating risk appetite trends on Thursday. Indeed, the release of inflation figures has grown in importance since the last FOMC event on the back of the data-dependent stance from the Federal Reserve and its direct impact on the size and timing of the next interest rate hikes.
Other than the September’s CPI, the usual weekly Initial Claims are due along with the EIA’s report on US crude oil supplies in the week to October 7.
What to look for around USD
The rally in the dollar appears to have met some decent hurdle in the 113.60 region so far this week. In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the index.
Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.
Key events in the US this week: Inflation Rate, Initial Jobless Claims (Thursday) – Retail Sales, Flash Michigan Consumer Sentiment, Business Inventories (Friday). Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months.
USD Index relevant levels
Now, the index is gaining 0.07% at 113.34 and faces the next up barrier at 113.59 (monthly high October 12) followed by 114.76 (2022 high September 28) and then 115.32 (May 2002 high). On the other hand, the breakdown of 110.05 (weekly low October 4) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13).