US Dollar: Growth data guide Fed expectations – BNY
BNY‘s Geoff Yu notes that softer United States (US) inflation has eased pressure for a more hawkish Federal Reserve (Fed) path, shifting focus to S&P Purchasing Managers’ Index (PMI) data for confirmation that growth remains resilient. With the Fed in a communications blackout, markets are expected to rely on activity indicators to balance cooling inflation against still-firm economic momentum for the Dollar and risk assets. Cooling inflation and key PMI signals “Last week‘s softer-than-expected core CPI reinforced the view that U.S. inflation is cooling at the margin, easing some of the pressure on markets to price a more hawkish Fed path. Fed communication was active before the blackout period, but the speakers did not materially shift the policy backdrop. The BoC’s decision to hold rates steady kept the Canadian policy outlook on pause as well.” “With the Fed now in a communications blackout after last weeks speaker-heavy schedule, there is limited scope for policy repricing from central bank commentary alone.” “The most important data point this week is likely the U.S. PMI suite – not because it will supersede inflation in market importance, but because it offers a timely read on whether activity is holding up alongside easing price pressures. A Manufacturing PMI print