U.S. CPI Data Seen as Key Driver of Dollar Moves, Analyst Says

According to Jin10, analyst Robert Howard said U.S. August CPI data could determine whether the Federal Reserve leans toward a rate hike or keeps rates unchanged at next week’s policy meeting, and it may affect the dollar’s direction. Reuters’ median estimate calls for headline CPI to rise 0.4% month over month and 3.4% year over year, while core CPI is expected to rise 0.2% month over month and 2.4% year over year. If the data comes in above expectations, hawkish voices are likely to grow louder, calling for a September rate hike and potentially supporting the dollar; if the data cools, doves are likely to argue for a sixth straight hold, which could weigh on the dollar. Markets currently see a 57% chance of a Fed rate hike this month, after stronger-than-expected nonfarm payrolls last Friday shifted expectations in a hawkish direction. That shift came 24 hours after Fed Governor Christopher Waller made dovish remarks that had pressured the dollar, while hawkish guidance from Fed Chair Kevin Warsh at Jackson Hole seven days earlier had lifted the dollar.