FOREX-Dollar is trading solidly in the calm before the storm CPI

Band Tom Westbrook

SINGAPORE, August 10 (Reuters)The dollar traded strongly on Wednesday in anticipation of US inflation data, which, while weaker than expected, is still likely to be so hot that a sharp hike in US interest rates will be needed. to contain it.

The figures are expected at 12:30 GMT. Economists expect headline inflation year-over-year USCPNY=ECI running at a torrid 8.7%, a small retreat from June’s whopping 9.1% figure. Core inflation is expected at 0.5% over one month USCPF=ECI.

Currency market movements were light in the lead up to the rise and for previous releases reactions were more subdued than in the volatile bond market. The greenback remained broadly stable overnight, although it did halt a bit of the retreat that began in mid-July.

He bought 135.14 Japanese yen JPY=EBS and sitting at $1.0208 per euro EUR=EBS. The Australian and New Zealand dollars eased slightly, the Aussie AUD=D3 last at $0.6958 – just above its 50-day moving average. The kiwi USD=D3 bought $0.6284.

Traders expect the reaction to turn on the underlying inflation figure.

“The market will initially be more excited by a downside surprise in core CPI than an upside surprise,” Deutsche Bank strategist Alan Ruskin said, raising hopes that falling commodity prices commodities means that inflation could quickly come down.

“It will also play into the market’s recent propensity to buy risk dips and be a broad-based negative effect for the US dollar,” he said.

“An upside surprise in core CPI will match the pattern of the last three releases… the purist dollar long trade in this case is against the yen,” he said, adding that the dollar/yen could likely reach 135-139 percent. dollar range.

A quick read of the reaction from policymakers may come from Fed officials Charles Evans and Neel Kashkari, who are due to deliver speeches at 3:00 p.m. GMT and 6:00 p.m. GMT, although they will have another set of price data in hand. August before the political meeting in September.

“A one-time sharp drop in the CPI at this point shouldn’t mean much to the Fed,” said NatWest Markets rate strategist Jan Nevruzi.

“They need to see at least a consistent multi-month trend to turn around, while accelerating inflation means there’s still a lot to do on the tightening front.”

Chinese inflation data is also due on Wednesday, but should show that it is firmly under control. The yuan CNY=CFXS faced some pressure from rising US-China tensions and a deepening real estate and banking crisis in China. CNY/

In offshore trading, the yuan CNH=EBS was stable at 6.7550 to the dollar.

Bitcoin BTC=BTSProcked by a drumbeat of cryptocurrency fund wipeouts and thefts over the past few months, fell sharply on Tuesday and was at $23,070 on Wednesday.

In emerging markets, the Bank of Thailand is expected to raise interest rates from record lows and the baht THB=TH clinging to recent gains. EMRG/FRX

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(Reporting by Tom Westbrook; Editing by Lincoln Feast.)

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