Dollar still on the front foot despite soft US CPI

The dollar has edged higher over the week as a whole despite the soft US CPI data released earlier today. Even so, the DXY index remains a touch below its recent peak two weeks ago, before the re-escalation of US-China tensions. With concerns around trade, and US credit issues, fading from view, and today’s data failing to generate much sustained downward pressure on the dollar, we think the near-term outlook for the greenback has improved. While the FOMC is set to cut the fed funds rate next week, that is already fully discounted. Our sense remains that money markets are discounting too many Fed cuts overall and not quite enough easing from the ECB, BoE and the BoC. With a bumper week for central bank policy announcements coming up, we think the balance of risks favour the dollar.