Dollar trading at a 7-month low after softer US PPI
The Dollar lost ground sharply yesterday after a softer US PPI print raised speculation of bigger interest rate cuts by the Fed. Today’s CPI numbers could show some increased volatility in markets, with bets on a possible 50bps cut in September now sitting at an above 50% probability. Current estimates are that CPI has risen by 0.2% MoM versus last month’s -0.1% drop, while the YoY number is forecast to be unchanged at 3.0%.
The Dollar is trading over 0.5% weaker against the Euro at 1.0996 and over 0.7% against the Pound at 1.2860. EM currencies, with the exception of the Mexican Peso, also trade firmer on the back of the softer Dollar. The Rand firmed steadily throughout the day yesterday and closed at R18.10, but further gains could be limited for now.
A softer US CPI print today would put the Dollar under further pressure but also raise fears of a recession in the US and weaker global growth, which in turn would be negative for risk-sensitive currencies like the Rand.
Gold steady, Brent crude firmer ahead of CPI
Gold is trading slightly below yesterday’s higher levels but still holding above the $2,450 mark ahead of today’s key US inflation data. The yellow metal continues to be underpinned by the rate cut bets and escalating Middle East tensions. Platinum is down around 0.5% this morning, while Palladium is marginally stronger. The softer Dollar and signs of lower US inventories lifted Brent crude to $81.25 this morning, but further gains are likely to be capped by the overhanging demand concerns.