BTMU FX Strategy Research notes that the Fed is facing a lack of progress on the inflation front which is already encouraging a shift towards a more dovish policy stance.
"Inflation proved weaker than expected for the fifth consecutive month in July. The annualized rate of core inflation has been running at just 0.8% over this period which was the weakest run since the end of 2014. On that occasion, the US dollar strengthened sharply whereas the US dollar has recently weakened sharply. It should help to lift inflation pressures going forward if sustained although the Fed should be more concerned by the current lack of inflation pressures.
Overall, the report has further solidified market expectations that the Fed is likely to delay raising rates again until next year.Dampened Fed rate hike expectations should help to keep the US dollar on a soft footing in the near-term," BTMU argues.
Source: BTMU ResearchOriginal Article
