Skip to main content

Dollar again on the backfoot as US inflation eases a touch

The US dollar has eased back a bit further against other G10 currencies this week as another round of slightly softer US inflation data dampened the recent rebound in US interest rate expectations. By contrast, today’s upside surprise in euro-zone inflation suggests the ECB will take a somewhat less dovish stance at its policy meeting next week than we had previously anticipated. The bigger picture is that, near-term noise in the data notwithstanding, we think inflation on both sides of the Atlantic is on a path back towards central banks’ 2% target. As such, we doubt there will be a major policy divergence between the Fed and the ECB; although we expect the key EUR/USD rate to fall back towards 1.05 (from ~1.085 currently), the bottom of its range over the past eighteen months.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access