Soft US CPI to weigh on USD near-term, but unlikely to start a long-term trend of sustained selling – Rabobank

The USD has been on the backfoot ahead of the US CPI inflation report. Economists at Rabobank analyze the greenback’s outlook.

Disinflation?

The headline number is expected at 3.1% YoY, down from the May number of 4.0% YoY. This would be the lowest number since early 2021. While core inflation is stickier, the Bloomberg survey median stands at 5% for the June number down from 5.3% the previous month.

A number in line or below expectations will likely allow EUR/USD to become more comfortable above the 1.10 level in the near-term. However, continued risk of recession in the US suggests that the USD is likely to avoid a strong sell-off on a three-to-six month horizon.

See – US CPI Banks Preview: Inflation to step meaningfully lower in June