The US Dollar (USD) is facing downward pressure as the US Dollar Index (DXY) drops in the European session, following a 0.50% decline the previous day. This decline comes after a surge in risk appetite on Tuesday, which lifted US equities and pushed US yields lower. The main catalyst for this move was weaker Producer Price Index (PPI) data for July, raising expectations for softer consumer inflation numbers.
Investors are now eyeing the US Consumer Price Index (CPI) data for July, set to be released later today. The outcome of this data, along with Europe’s preliminary Gross Domestic Product (GDP) release, could have a significant impact on the US Dollar Index’s movement.
Key Market Updates: What to Watch Out For
- Japan is in search of a new prime minister as Fumio Kishida opts out of running for a second term.
- The Royal Bank of New Zealand (RBNZ) surprised markets with a 25 basis point interest rate cut, signaling the start of a cutting cycle. This move led to a 1% drop in the New Zealand Dollar against the US Dollar.
- The Mortgage Bankers Association (MBA) will release its weekly Mortgage Applications Index for the week ending August 9 at 11:00 GMT.
- US consumer inflation data for July is set to be released at 12:30 GMT, with expectations of a 0.2% rise in headline CPI and core CPI.
- Equity markets in Japan are rallying on news of a new prime minister, while European equities are up less than 0.5%.
- The CME Fedwatch Tool shows a 47.5% chance of a 25 bps rate cut by the Fed in September, with expectations of further cuts in November.
- The US 10-year benchmark rate is trading at 3.84% and hitting fresh lows for the week.
Technical Analysis: What the Charts Say
The US Dollar Index (DXY) has retreated from the key 103.18 level following the PPI release. A break below 103.00 could signal further downside, with support at 102.17 and 102.00. On the upside, resistance lies at 103.18 and 104.00, with the 200-day SMA at 104.12 posing a hurdle.
Overall, investors should pay close attention to the US CPI data release, as it could drive significant movements in the US Dollar Index. The outcome of this data will not only impact currency markets but also influence global equities and interest rate expectations. Stay tuned for more updates on this developing story.