Forex overview. US Dollar Tracks Higher as Markets Shift Focus to Next Week’s Inflation Print – ForexNews.PRO
USD: CPI Data in the Spotlight Next Week
The US dollar’s value is still heavily influenced by incoming data, with trade-related announcements having a muted effect. President Trump recently threatened Canada with a 35% tariff on certain goods starting August 1st and suggested potential 15-20% tariffs on most US trading partners, a significant increase from the current 10%.
Trump’s letter to Prime Minister Carney cited “unsustainable trade deficits” caused by Canadian trade barriers.
The recent fifth consecutive decrease in initial jobless claims suggests the Fed is unlikely to cut rates in September solely due to a weakening job market. This elevates the importance of Tuesday’s inflation data. The expected core CPI increase is 0.3% month-over-month, potentially raising the year-on-year CPI from 2.8% to 2.9%.
Without dovish signals from officials like Waller and Bowman, and Trump’s continued pressure, this CPI print might have eliminated the possibility of a September rate cut. Currently, a 0.4% print might be needed to fully convince markets that a cut is off the table.
The June federal budget balance is expected to be -$30 billion. While a significant deviation could affect FX rates, markets seem to have deprioritized the budget. Tariffs also have a limited impact on the dollar.
Unless the US targets major trading partners like China, the EU, Mexico, or Canada with new tariffs, the dollar is likely to disregard this protectionism, with FX effects mainly confined to specific regions. The DXY index might remain near 97.50 or slightly increase due to pre-CPI positioning.
EUR: Waiting for EU-US Trade Deal News
The EUR/USD exchange rate remains closely linked to Fed actions and US data, and an EU-US trade agreement is unlikely to fundamentally change this dynamic.
Despite the euro’s strength being a key topic during recent discussions, the ECB has been quiet on this issue. French Prime Minister Bayrou has called for the ECB to implement looser monetary policy to provide greater support.
EUR/USD briefly fell to 1.1670, and the pair may stay around 1.170 in the short term due to the absence of new data releases.
