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Post-CPI Price Action in USD

Post-CPI Price Action in USD

James Stanley, Senior Strategist

Talking Points:

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- This is an archived webinar of a previous session based around the topic of Price Action. Today’s webinar centered the discussion around the U.S. Dollar after this morning’s U.S. CPI print.

- While this morning’s CPI print was roughly in-line with market expectations, it was something else happening around that time that may have contributed to additional strength in the U.S. Dollar, and that was commentary from New York Fed President William Dudley that said markets are underpricing the probability of a move at the bank’s next meeting in September.

- This is very similar to what happened after the April FOMC meeting when, much like July, the bank posed a ‘less hawkish’ statement to markets with a rather muted response. But in the days following the April Fed meeting, multiple Fed members talking up the prospect of 2-3 hikes in the remainder of the year helped to bring the Dollar higher through much of May.

- These hopes for higher rates or even a more hawkish Fed were seemingly vanquished after the NFP report released on June 3rd massively disappointed expectations. This brought on USD bearishness again, and that lasted until the Brexit referendum.

- At the most recent FOMC meeting, the bank again made a slightly less-dovish statement, saying ‘near-term risks to the economic outlook have diminished.’ But this failed to bring strength into the US Dollar, and expectations for a rate hike in September continue to remain subdued.

- The big question at this point is whether the release of the July meeting minutes tomorrow will reflect Mr. Dudley’s sentiment across the Fed, with expectations for a potential hike by the end of the year, perhaps as soon as September. If this takes place, we may be in for a redux of May’s price action that saw USD strengthen throughout much of the month.

--- Written by James Stanley, Analyst for DailyFX.com

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