US dollar benefits from CPI print

The US dollar has moved into positive territory following Wednesday’s CPI reading, confirming another Fed rate increase. This week, the US Dollar Index turns green and is in positive territory; as the US Dollar Index is recording 104.730 at the time of writing

Traders are seeking direction as they interpret the recent data, which does not allow the US Federal Reserve to make any cuts anytime soon. The core inflation element without food and energy has declined from 4.7% to 4.3%, while the overall index is turning higher from 3.2% to 3.7%. Traders have cemented the possibility of one more hike from the ECB for 2023, where hikes were no longer expected just a few days ago.

The Mortgage Bankers Association’s Mortgage Applications for the week of September 8 showed an index drop from -2.9% to -0.8%. The biggest chunk of data came out at 12:30 GMT with the US Consumer Price Index (CPI) for August, showing year-over-year inflation from 3.2% to 3.7%, month-over-month from 0.2% to 0.6%, and core inflation, without food and energy, from 4.7% to 4.3%.

The US Energy Information Administration (EIA) will give its latest crude stockpile movements at around 14:30 GMT, with expectations for a smaller drawdown from 6.307 million to 1.912 million barrels less.

The CME Group FedWatch Tool shows a 93% chance that the Federal Reserve will keep interest rates unchanged at its meeting in September. Markets are gearing up for another rate hike from the Fed, with the new high to watch being 105.16, both the high from last Thursday and the six-month high. The next level to watch is 105.88, the high of 2023.