The U.S. Dollar has fallen to its weakest levels since the start of February, per the Bloomberg Dollar Spot Index, following the release of inflationary data in the form of the Consumer Price Index.
Overview
June CPI figures revealed disinflation, and the yearly core measure, which advanced 4.8% over the expected 5.0%, is at its lowest point since the fourth quarter of 2021. At the moment of writing, risk markets seemed elated with the news as it places some doubts over the Fed’s long-term need to hike interest rates further.
No matter what, inflation remains way above the Fed’s target, but all other economic indicators have also shown resilience, if not impressed with expansion, thus giving the Fed credit for forecasting the scenario of an economy strong enough to withstand higher borrowing costs post-pandemic shocks. As of now, the hawkish nature of Fed policy and stubborn inflation have propelled the buck to even all-time record highs against some currency pairs, but we shall see if the prospect of an expanding economy both here and globally only pushes for the type of risk appetite that will naturally cause extended dollar losses.
What to Watch Today…
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EUR ⇑
The shared currency is trading at its strongest point since March 2022, enjoying the positivity behind a more unified NATO defense strategy, which bodes well for economic growth through military spending. Additionally, good news out of China in regard to the nation’s willingness to aid the financial system with stimulus to alleviate such headaches as the housing crisis has been seen as a booster to Euro-zone’s health. While prices remain quite high, you are seeing the levels of price-growth slow down, even in countries such as Spain. Expect enthusiasm before the European Central Bank’s meeting in two weeks.
CAD ⇑
The “Loonie” is up to its best level over the buck just two weeks ahead of the 10 AM Bank of Canada meeting. It is expected for the BOC to raise interest rates by 25 basis points, thus bringing the benchmark rate to its highest in 22 years. We shall await the tone as bets are increasing. This could be the last interest rate increment in a while after a long cycle of tightening.
