Dollar Gains as Markets Brace for CPI Data and Warsh Testimony
The U.S. dollar climbed against all major currencies Tuesday as traders position defensively ahead of June CPI and Fed Chair Warsh's Congressional testimony.
The U.S. dollar opened Tuesday's North American session with broad-based gains, rising against every major currency as Wall Street braced for two market-moving events: the June Consumer Price Index report and Federal Reserve Chair Kevin Warsh's testimony before Congress. The New Zealand dollar took the steepest hit, falling 0.89% to 0.5799, while the Australian dollar, Canadian dollar, Swiss franc, British pound, Japanese yen, and euro each declined by smaller margins.
The kiwi's sharp underperformance follows a paradox from last week: the Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.50% and flagged potential further tightening, which sparked a kiwi rally that now leaves the currency exposed to profit-taking. Commodity-linked currencies are leading declines broadly, while traditional funding currencies like the euro and yen are holding up comparatively better — a classic sign of risk-off positioning.
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Market consensus heading into the CPI print calls for headline inflation of 4.2% year-over-year, up from 3.8% prior, and a 0.2% monthly gain versus a prior decline of 0.1%. Core CPI is expected to hold at 0.2% month-over-month, with the annual rate ticking up slightly to 2.9%. Fed Governor Waller said Monday that another firm core reading would reinforce the case for keeping policy restrictive and could even support an additional rate hike, raising the stakes for today's release.
U.S. equity futures are mixed heading into the open. IBM is dragging the Dow down sharply — its shares fell nearly 23% in premarket trading after missing both earnings and revenue estimates. Meanwhile, Goldman Sachs surged after dramatically beating expectations with EPS of $20.98 against a $14.47 estimate. JPMorgan, Bank of America, and Wells Fargo all beat on earnings and revenue but saw their shares slip in premarket trading despite the strong results.
With Warsh's prepared testimony potentially dropping at the same time as the CPI data, traders face a compressed window of high-impact information that could rapidly reprice Fed rate expectations. Until those numbers hit, positioning and caution — not conviction — are driving the foreign exchange market. Continue reading at Forexlive.
