The US dollar firmed after US CPI matched expectations, as market positioning had leaned towards a hotter release. Headline CPI rose 0.1% month on month and core CPI increased 0.2%, yet the greenback ended the session stronger as rate expectations adjusted only modestly and some long exposure was rebuilt. Core inflation was described as running at a 1.6% three-month annualised pace, while implied US policy pricing remained restrictive and kept FX volatility contained ahead of the Jackson Hole Symposium.
Fed Policy Outlook and Rate Expectations
Fed expectations stayed hawkish despite recent data shaving 5bp off September FOMC pricing; 9bp of tightening is still implied for that meeting, and the curve continues to price a full 25bp hike for December. Attention now turns to next week’s FOMC minutes and the day’s PPI release, with further second-tier data also in focus for near-term USD direction.
Geopolitical Developments and Market Sentiment
Separately, developments in the Gulf, including the Strait of Hormuz negotiations, were flagged as a potential driver via broader risk sentiment.
