USD weakness caused by easing inflation to be short-lived – Commerzbank

Antje Praefcke, FX Analyst at Commerzbank, would not go straight for the first data publication this week even if it might have a Dollar-negative effect in case the result comes in below market expectations.

Do not go straight for the first set of data

“As no important publication is on the agenda for today we are likely to see a quiet trading day. The next heavy-weight is not due until tomorrow in the shape of the US inflation data.”

“Even if inflation was going to ease more significantly than the market expects that does not necessarily mean that the market will immediately switch to a Dollar-negative view again. I think that would require a bigger set of data that illustrates an overall picture of a more pronounced economic slowdown caused by the past rate hikes and might dampen Fed hopes of a soft landing. Only at that stage would it be justified in my view for the market to increasingly rely on the Fed moving in its direction, which would then put pressure on the Dollar.”

“If tomorrow’s inflation data comes in below market expectations, I would expect a short dip in the Dollar but I would be cautious about expecting this to continue all week.”