Round-up
Heading into the US consumer price index (CPI) data last night, the US Federal Reserve (Fed) was hoping to see “more good data” to have greater confidence in opening the door to upcoming rate cuts and the second straight month of downside surprises in US inflation seems to tick the box.
Headline inflation dipped to 3.0% year-on-year from the 3.3% prior, while the core aspect touched its lowest level since May 2021 at 3.3% from the 3.4% prior. Importantly, the supercore services inflation declined for a second straight month, in reaction to easing housing inflation.
It seems that the Fed can hardly find fault with this set of numbers and markets thought so as well, with further dovish bets in place to price for a September rate move (85% odds versus the 70% before the CPI release). Treasury yields dipped across the board, with the 10-year yields touching its lowest level since March this year, while the US dollar was down close to 0.5%.
US dollar dipped back to key trendline support
Further build-up in dovish rate expectations dragged the US dollar to its one-month low overnight, briefly dipping below a key upward trendline support before dip buyers stepped in to defend the trendline. For now, buyers are still attempting to keep the higher-lows formation since July 2023 intact, but it has been an arduous battle. Its daily relative strength index (RSI) has struggled to cross back above its mid-line, which may suggest sellers still in near-term control. One to watch for any dip below the June 2024 low at the 103.40 level, which could be a signal of buyers giving way.
