Risk/Reward: Buying USD Dips Or Chasing Its Weakness? – Credit Agricole

The main data release of the week will be Tuesday’s CPI where we expect some slowing in both the headline and core YoY rates.

Last week’s retail sales report triggered only a slight revision to our economist’s Q3 GDP forecast to 2.8% from 2.9%. If the CPI comes in line with our expectations the overall US growth-inflation mix should be consistent with the Fed delaying the next policy move until December.

Since the rates market is already priced for little chance of tightening in September we think the medium-term risk-reward is more attractive for buying USD on pullbacks, rather than chasing weakness.

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