The Dollar Index was steady near 99.80 in a sub-0.2 point range, pinned between the 200-day EMA around 99.50 and the 100.00 handle since late July. Data offered little direction: the four-week average of private hiring slowed to 8.25K from 11K, while existing home sales fell 1.7% month on month. Rate pricing remained finely balanced, with futures assigning 50.1% odds of a hold at the 16 September meeting versus 49.9% for a quarter-point move. Across eight consecutive FOMC meetings from September through July 2027, the market prices a 0.0% probability of a cut, with the first non-zero reading at 0.5% in September 2027, while the modal path is a quarter point higher by spring.
Attention turns to inflation and fiscal prints. Consensus sees July CPI at 3.4% year on year from 3.5%, and core at 2.5% from 2.6%, whereas Thursday’s PPI is seen at 4.9% with core at 4.2%. Q2 productivity data showed unit labour costs at 1.3% annualised against a 7.0% value-added output deflator, with labour share the lowest since 1947. Two Fed presidents speak at 12:15 GMT and 12:40 on Thursday. Wednesday’s budget statement is forecast at a $346bn deficit versus $120bn previously; claims are seen at 202K from 199K, retail sales at 0.1% from 0.2%, and Michigan sentiment at 54.5 from 55.2, with inflation expectations previously at 4.2% (one-year) and 3.3% (five-year). Technically, 100.00 caps upside; above it sit the 50-day EMA near 100.25 and a late-July high just over 101.50, while support is the 200-day EMA near 99.50 with lows around 99.45, then 99.00 and 98.50.
Dollar Index: Tight Range and Imminent Breakout Risks
We should watch the tight coil in the US Dollar Index, which is currently trading near 99.80, squeezed between its 200-day EMA at 99.50 and the 100.00 level. With the September 16, 2026 FOMC meeting sitting at a literal 50/50 coin flip between a hold and a 25-basis-point hike, the near-term direction is highly sensitive to this week’s data. We recommend preparing for a breakout, as this narrow two-tenths of a point range is unsustainable.
Inflation, Geopolitics, and Outlook on the Dollar
We face a major test today with the July CPI expected to ease slightly to 3.4% YoY, followed by tomorrow’s PPI which consensus puts at a much hotter 4.9% YoY. This wide gap shows that the tariff pipeline and geopolitical pressures are being absorbed by corporate margins rather than being fully passed to consumers yet. If tomorrow’s producer data comes in hot, it will create the cleanest hawkish setup of the week, especially with two regional Fed presidents speaking right around the release.
We must also recognize that geopolitical risks in the Middle East, particularly around Iran and the Strait of Hormuz, are no longer driving investors to the dollar as a safe haven. Instead, escalation headlines are bidding up Brent crude oil, which has been hovering near $78 a barrel, boosting the currencies of energy exporters. This means geopolitical risk now reaches the dollar indirectly through the inflation pipeline, making this week’s wholesale price data even more critical.
We suggest maintaining a bullish bias on the dollar as long as the 200-day EMA support band near 99.50 holds. Because futures markets have priced in zero rate cuts through mid-2027, a dovish CPI print has very little room to push the dollar down, whereas a hawkish surprise has a clear path to rally. We should target resistance at 100.00 and the 50-day EMA near 100.25, while managing risk with invalidation levels on a daily close below 99.45.
