U.S. CPI Sets a Lower Start for U.S. Dollar

Before the much-awaited U.S. inflation data publication, the dollar dropped in European trade this Tuesday.

The Dollar Index was trading 0.3% down at 107.803 at 03:05 ET (07:05 GMT), extending a decline from the 20-year high of 110.79 last week. The U.S. CPI for August will be the final key indicator of the country’s inflationary pressures before next week’s Federal Reserve policy-setting meeting. This index will be released on Tuesday at 8:00 ET (12:30 GMT).

What Do Experts Predict for This Month Market?

Analysts predict that the headline number will be 8.1%. The forecast would be lower than the previous month’s 8.5%, considering the roughly 10% drop in gasoline prices. Inflation is expected to decrease by 0.1% every month after remaining unchanged in the previous month. According to analysts at ING, it will take some surprise figures to have the Fed divert from a third consecutive 75bp rate hike.

All in all, Fed Chair Jerome Powell says they need to act immediately, forthrightly, and aggressively as they have been doing. They have to remain at it until the job is done. The economy is growing rather well and adding employment in considerable numbers.

The euro continued to gain from the ECB’s jumbo rate hike from last week and the associated hawkish remarks by many officials. It will include the influential President of the Deutsche Bundesbank, Joachim Nagel, pointing to rate increases further this year. EUR/USD increased by 0.2% to 1.0139.

Data released on Tuesday indicated that German inflation remained high in August, coming in at 7.9% annually. This will likely harm the German ZEW economic mood index later in the day. Despite the U.K. job growth slowing significantly in the three months leading up to July, the GBP/USD exchange rate increased by 0.3% to 1.1708 and maintained the high gains witnessed overnight.