Upcoming announcement of the US CPI has a significant impact on currencies
📌The U.S. dollar slumped to its lowest level in two months, while the British pound climbed to a 15-month high ahead of a crucial U.S. inflation report. The Dollar Index, which tracks the greenback against a basket of currencies, fell 0.3% to 101.140, extending losses from earlier in the week following indications from several Federal Reserve officials that the central bank was nearing the end of its monetary policy tightening cycle.
📌Although a 25-basis point interest rate hike at the upcoming Federal Reserve meeting is largely expected, market focus is on the U.S. consumer inflation report, which could impact the number of future rate hikes. It is anticipated that headline consumer prices rose 3.1% in June, a slowdown from May’s 4% increase, and the slowest annual increase since March 2021, with a monthly increase of 0.3%. The annual core inflation rate is expected to drop to 5% from 5.3%, declining for the third consecutive month.
📌In summary, the U.S. dollar weakened due to expectations of the Fed’s nearing end to its monetary tightening, while the British pound gained strength on expectations of further rate hikes in the UK. The upcoming U.S. inflation report will play a crucial role in shaping the Fed’s future interest rate decisions.