HomeForex MarketJune US Inflation Information May Reinforce DXY’s Bullish Momentum

June US Inflation Information May Reinforce DXY’s Bullish Momentum

US DOLLAR OUTLOOK: BULLISH

  • The U.S. greenback, measured by the DXY index, rallies within the week and trades close to multi-year highs heading into the weekend
  • The near-term outlook stays bullish for the dollar
  • June U.S. inflation knowledge subsequent week may very well be a optimistic catalyst for Treasury charges and the DXY index

Most Learn: EUR/USD Parity Inside Touching Distance as USD Surges Forward of Key Information

The U.S. greenback, measured by the DXY index, had one other sturdy week, rising greater than 1.7% to shut close to 107.00, considered one of its finest ranges since late 2012. Whereas bullish momentum could also be overextended after a year-to-date advance of practically 12%, the broader outlook stays constructive, at the least from a basic standpoint.

Since mid-June, U.S. Treasury yields have repriced decrease on the idea that the U.S. central financial institution would blink and pivot to stop a big financial downturn. Nonetheless, the Fed has not given any indications that it intends to step on the brakes; quite the opposite, policymakers have signaled that they are going to press forward with their plans to take away coverage lodging aggressively of their effort to revive worth stability.

Regardless of the continued headwinds, macro-related knowledge have held up properly, notably from the labor market, with the most recent NFP survey confirming this evaluation. For present context, the June non-farm payroll report confirmed a internet acquire of 372,000 jobs, properly above consensus expectations of a 268,000 enhance, an indication that hiring circumstances stay stable.

With employers nonetheless including staff at a wholesome tempo to fulfill buyer demand, fears that the economic system is headed off the cliff into the depths of a recession could also be overblown. Towards this backdrop, the Fed might retain a hawkish stance and keep the tightening course, at the least till there may be resounding proof that inflationary forces are easing decisively.

We’ll get a greater image of the inflation profile subsequent week when the U.S. Bureau of Labor Statistics releases the June client worth index. Headline CPI is anticipated to rise 1.1% m-o-m, bringing the annual price to eight.8% from 8.6%, a brand new cycle excessive. Gasoline costs set recent data within the first half of final month, so the outcomes might shock to the upside on the again of hovering vitality prices.

One other red-hot CPI report, just like the one in Could, ought to enhance bets for super-sized hikes at upcoming FOMC conferences and put upward strain on the terminal price, which now stands at round 3.58% in accordance with Fed funds futures (April 2023 contract).

Within the present surroundings, the US greenback is more likely to preserve a bullish bias, particularly if U.S. Treasury yields stage a robust restoration within the very close to time period after their current correction. Having stated that, merchants ought to put together for the potential for the DXY index lurching in the direction of new multi-year highs within the coming week.

US DOLLAR WEEKLY CHART (DXY)

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—Written by Diego Colman, Market Strategist for DailyFX

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