US CPI data will just reinforce the current range trading for the Dollar – MUFG

The US Dollar weakened modestly on Thursday – which is consistent with the fact that the CPI data reinforced the prospect of monetary easing in 2024, in the view of economists at MUFG Bank.

Inflation data underlines favourable outlook

We certainly saw enough in this CPI report to remain of the view that inflation is set to continue slowly drifting lower and backs up our view that it is likely at this stage that the Fed has finished its tightening cycle.

So we suspect this data will just reinforce the current range trading for the Dollar. We have in fact oscillated mostly between 100-104 in DXY since April and this CPI report is enough to maintain current market pricing on Fed rate cuts next year. That will limit the upside for the Dollar while weak growth abroad will likely limit the USD downside scope for now as well.