Yesterday saw the dollar fluctuate wildly. The dollar plunged after the US Consumer Price Index slowed down. However, the dollar rebounded when the US FOMC raised its inflation outlook and adjusted members’ median interest rate forecasts from three cuts this year to one. Despite these events, the dollar has not fully returned to pre-announcement levels of strength.
With the dollar still under some pressure, today’s focus will be on the May US Producer Price Index (PPI) and the weekly US initial jobless claims. The PPI is expected to rise to +2.5% year-over-year (previously +2.2%) and core PPI to +2.5% (previously +2.4%). On a monthly basis, the PPI is expected to slow to +0.1% (previously +0.5%) and core PPI to +0.3% (previously +0.5%). Initial jobless claims are expected to show little change at 225,000 (previously 229,000). If the results are in line with expectations, the market reaction may stay within yesterday’s trading range.
Additionally, tomorrow’s Bank of Japan monetary policy meeting results are pending. The USD/JPY pair has recovered to the 157 yen level, indicating both dollar strength and yen weakness. The market expects reduced government bond purchases, and Governor Ueda’s comments on potential rate hikes will be crucial. However, his recent statements do not suggest an aggressive stance on rate hikes.
In related events, speeches from Estonian Central Bank Governor Muller, Bank of Canada Deputy Governor Kozicki, New York Federal Reserve President Williams, and US Treasury Secretary Yellen are scheduled. Williams’ comments will be particularly noteworthy following the FOMC meeting.
The USD fluctuations yesterday were somewhat expected, but it’s unfortunate that the USD/JPY buy was stopped out. Today’s focus will again be on the US PPI results . PPI often causes significant market movements, so the preference is to follow a USD buying trend if it emerges.
