Anna 
The dollar and the broader foreign exchange market have experienced subdued trading activity at the beginning of this week, with traders eagerly awaiting the release of the latest U.S. inflation data, which is expected to have significant implications for near-term sentiment and potential rate adjustments.
The April Producer Prices Index (PPI) is scheduled for release later on Tuesday, preceding Wednesday’s highly anticipated Consumer Price Index (CPI) report. Analysts anticipate that the core CPI will show a 0.3% month-on-month increase in April, slightly lower than the 0.4% growth observed in the prior month.
The Federal Reserve has emphasized that any decisions regarding rate cuts will be data-dependent. The market has priced in approximately 42 basis points of easing for the remainder of the year, with a 60% probability of a rate cut in September, according to the CME FedWatch tool.
Analysts at ING noted, “Today’s PPI and tomorrow’s CPI figures will tell us whether the US has made further steps in the disinflation process, or if prices remain too sticky for the Federal Reserve to cut.” The expectation is that persistent inflationary pressures could diminish the likelihood of rate cuts for the remainder of the year.
The uncertain outlook surrounding inflation data may leave foreign exchange (FX) markets lacking a clear sense of direction and could contribute to continued low volatility levels in the near term. Traders will closely monitor the upcoming economic releases for insights into potential market movements and policy implications.
