The dollar has been showing some strength since the French election results, although the markets did not experience any major shifts. FX volatility has been decreasing since June, according to ING’s FX strategist Francesco Pesole. The DXY is currently around 105.00 and investors are awaiting the CPI report on Thursday.
One notable event to watch out for is Federal Reserve Chair Jerome Powell’s testimony to the Senate, with a repeat performance scheduled for the House the next day. It may be challenging to discern relevant policy comments amidst the questions from policymakers, but the market impact will likely be focused on the release of Powell’s opening remarks. ING maintains a view that any deviation from the current narrative should lean towards the dovish side, as Powell may find the June Dot Plot revisions too hawkish and may need to adjust communication based on recent data.
In terms of data, the focus will be on the NFIB Small Business Optimism index for June and the hiring plans index, which can predict changes in private payrolls three months in advance. The DXY is expected to remain around 105.00 leading up to the CPI report on Thursday. Any dovish surprises from Powell could potentially be balanced out by concerns surrounding EU politics.
Overall, the dollar has been holding steady in the wake of the French election results, and FX volatility has been on the decline since mid-June. With Federal Reserve Chair Jerome Powell set to testify before Congress, investors will be watching closely for any hints of a shift towards a more dovish stance. Key data points to watch include the NFIB Small Business Optimism index and the hiring plans index, which can provide insights into the future of private payrolls. Despite some potential dovish signals from Powell, concerns regarding EU political issues may temper any significant movements in the dollar.
As the week progresses, the focus will turn towards the CPI report on Thursday, with expectations for the DXY to remain around 105.00. Any surprises in the data release or in Powell’s testimony could lead to fluctuations in the dollar. It will be important for investors to stay informed and monitor developments in the markets closely, as global economic events continue to influence currency movements. Overall, the dollar’s strength post-French election may face challenges as the week unfolds, with various factors at play in the forex market.
