Dollar Continues Down, Markets Await US Consumer Inflation Release

The US dollar weakened in early European trade Tuesday (09/08) afternoon, extending its previous weakness ahead of the release of US consumer inflation data.

 At 2:55 p.m. EDT, the US Dollar Index, which measures the greenback against a basket of other currencies, was down 0.1% at 106.188, away from Friday's peak of 106.93, its highest level since July 28.

 Friday's strong July US jobs report added to expectations the US Federal Reserve will continue its aggressive monetary tightening with another 75 basis point rate hike in September.

 "The very strong US July jobs report released on Friday has slightly eased concerns around recession and provided credence to last week's impetus from the Fed that they are not done in terms of tightening," said analysts at ING, in a note.

 This puts Wednesday's release of the US consumer price index in focus, and another major release is likely to fuel the increase.

 July inflation data is expected to fall at 8.7% y/y from 9.1% previously, but a New York Fed survey showed consumer inflation expectations fell in July, and this may offer another downside potential for the figure.

 A large drop in CPI releases could provide enough evidence that inflation has peaked to persuade the Fed to loosen its aggressive tightening path, and the dollar has been moving down in a tight trading range ahead of the data.

 EUR/USD was up 0.1% at 1.0206, USD/JPY was down 0.1% to 134.90, while the risk sensitive asset AUD/USD was down 0.2% to 0.6976.  Rupiah ended up 0.15% at 14,852.5 per US dollar today.  Meanwhile, Bitcoin fell 1.19% at 23,837.0 per US dollar at 3:35 p.m. WIB BTC/USD.

 GBP/USD is up 0.1% at 1.2086.  Sterling traders are now focused on Friday's release of UK GDP, which is expected to show a drastic decline of 1.2% on Friday a month as the country faces rising interest rates and a spike in inflation.

 "Weak activity will highlight the BoE's warning against the UK entering recession in Q4 2022 and contracting 2% over the next five quarters," ING said.

 "Sterling may not be selling any more because investors don't quite know what to do with the reserve currency that will be backed by interest rates at 2.25% if we are right with our BoE call for a September meeting."

 Furthermore, Nickel Futures were down 0.55% at 21,566.50 at 15:36 WIB Tuesday evening, Timah was down 0.63% at 24,300.00 at ICE London at Monday's close.  Others, Rubber 1.11% to 154.40 at Monday's close in Singapore, Newcastle Coal at ICE London ended at 361.00 levels in last Friday's trading, and US Cocoa was up 1.39% at 2,337.00 at 12:29 WIB.

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