[Tonight’s Focus] Will U.S. CPI Extend the Dollar Rally or Trigger a Pause?

[Tonight’s Focus] Will U.S. CPI Extend the Dollar Rally or Trigger a Pause?

Tonight’s release of the U.S. June Consumer Price Index (CPI) is the key event dominating market attention. With the dollar’s upward trend intact, the inflation data will be a critical factor in shaping the next move in the forex market.

✅ U.S. CPI – Key Details and Market Expectations

• Reference Month: June

• Consensus Forecasts:

  • CPI YoY: +2.6% (previous +2.4%)

  • Core CPI (ex-food & energy): +2.9% (previous +2.8%)

Scenario-based Market Impact:

• Above Expectations (Strong Print): Accelerated dollar buying, rate-cut bets diminished

• Below Expectations (Weak Print): Dollar selling gains traction, renewed rate-cut speculation

Former President Trump continues to insist on social media that “inflation is well under control” and is pressuring Fed Chair Powell for rate cuts—or even resignation. Depending on the CPI outcome, Trump’s comments could once again inject “noise” into the market.

✅ Dollar Outlook: Market in Wait-and-See Mode

• Dollar Index (DXY):

  • Holding near 98.127 earlier, softening to 97.931 later

  • 21-day MA (97.750) acting as key support

• USD/JPY:

  • Trading in a narrow range around 147.60–147.80

  • U.S. 10-year Treasury yield slightly lower at 4.41%

• Other Majors:

  • EUR/USD: Rebounded to 1.1693

  • GBP/USD: Hit a fresh high at 1.3456

Overall, the market remains in consolidation, awaiting the CPI release as the next major catalyst.

✅ Canada CPI Also Due: Limited CAD Reaction Expected

• Market Forecasts:

  • Headline CPI: +1.9% (previous +1.7%)

  • Core Median & Trim: +3.0% (unchanged)

If inflation falls below 2%, the Canadian dollar’s upside could be capped, with rate-cut expectations coming into play.

✅ Europe and Other Key Data Points

• Germany ZEW Economic Sentiment (July):

  • Forecast: 50.4 (previous 47.5)

  • Expected to surpass 50 for the first time since March, signaling recovery optimism

• Other Indicators:

  • India: CPI & WPI

  • Switzerland: Producer & Import Prices

  • Canada: Wholesale Sales

These are expected to have limited market impact.

✅ Key Speeches and Events

• Fed Officials:

  • Vice Chair Bowman, Governor Barr, Presidents Barkin and Collins scheduled to speak

  • Comments after CPI will be closely watched

• Bank of England:

  • Governor Bailey scheduled to deliver remarks late in the U.S. session

• U.S. Corporate Earnings Season Begins:

  • Major financials like JPMorgan, Citi, BNY Mellon, and BlackRock reporting results

📌 Key Themes for Today

• CPI as the pivotal driver for the dollar:

  • Above Expectations: Rate-cut bets fade, dollar rally extends

  • Below Expectations: Rate-cut speculation revives, dollar faces selling pressure

• Fed commentary and U.S. corporate earnings could reinforce market reaction to CPI.

👉 Bottom Line: Tonight’s CPI will likely determine whether July’s dollar rally continues or shifts into a corrective phase. Prepare for heightened volatility post-release, and manage risk carefully for short-term trades.