US Dollar Fundamental Forecast: Neutral
- USD gives back post-CPI gains into the weekend
- Downbeat retail sales fogs Fed taper talk expectations
- Upcoming FOMC may provide next shift for US Dollar
A much hotter-than-expected consumer price inflation (CPI) print roiled markets and saw a wave of strength carry the Greenback higher last week. However, a softer-than-expected retail sales print sapped strength into the weekend. An uptick in consumer inflation expectations through the University of Michigan’s consumer confidence survey did little to revive the USD.
Taper talks suggesting the Federal Reserve may have to tighten policy sooner than the markets initially believed injected last week’s run. Markets priced in a less dovish path for the Fed, assuming that the higher inflation print will continue into forward months, dispelling Chair Jerome Powell’s “transitory” outlook on prices. Those assumptions were tempered into the weekend, but the move highlights the impact price pressures can have on financial markets.
While we haven’t been without commentary from Federal Reserve members over the past couple of weeks, the coming Federal Open Market Committee (FOMC) minutes may give markets further insight into the inner thoughts of the US central bank. Last week’s CPI followed the Committee meeting, but any fresh clues as to how the Fed would react to various inflationary outcomes in the near term may influence the US Dollar.
US Dollar TRADING RESOURCES
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwateron Twitter