The Dollar has not benefited much from the hotter US CPI figures released on Tuesday. Economists at ING analyze Greenback’s outlook.
Dollar starts to look cheap in the short term
Core CPI rose by a hot 0.4% month-on-month in February, higher than the consensus 0.3%, but the market reaction has been very contained compared to a month ago when inflation surprised by a similar margin. Indeed, the actual whisper number was closer to 0.4%, but that does not make the rally in US equities after the release any less surprising. We think, instead that markets continue to rely quite heavily on Powell’s relatively dovish testimony, which has made rate cut expectations arguably stickier.
The hot CPI should warrant a stronger Dollar from these levels, and we think there is a good chance that the USD will find more support in the coming days.
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