US Dollar: CPI-driven range signals carry focus – OCBC

OCBC’s Sim Moh Siong and Christopher Wong highlight that the US Dollar (USD) stayed mixed as markets waited for the key United States (US) Consumer Price Index (CPI) release, with Middle East tensions and hawkish Federal Reserve (Fed) rhetoric offsetting each other. They expect CPI to be pivotal for September FOMC pricing, while a rangebound Dollar and supportive risk backdrop continue to favour carry trades in the near term.

CPI to steer FOMC expectations

“Markets stayed sidelined ahead of US CPI, with mixed USD performance reflecting conflicting Middle East headlines and hawkish Fed rhetoric. Today’s inflation print is likely to be pivotal for September FOMC pricing, while a rangebound USD continues to favour carry trades.”

“US data offered a more constructive signal. The NFIB Small Business Optimism Index rose to 99.8 in July from 97.4 in June, beating consensus expectations of 97.5 and reaching its highest level since August 2025. Much of the improvement was driven by a sharp rebound in hiring intentions, contrasting with last week’s softer payrolls report.”

“We expect the CPI release to be a key catalyst for market pricing ahead of the September FOMC meeting, which is currently viewed as a near-even split between a rate hike and a hold. A July core CPI reading of 0.3% MoM or higher, above the 0.2% consensus forecast, would likely strengthen expectations of a September hike.”

“In the meantime, a range-bound USD and a generally supportive risk environment should continue to underpin carry trades, despite persistent volatility in oil markets and ongoing FX intervention risks surrounding the JPY.”

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