The U.S. dollar traded slightly lower ahead of today’s U.S. CPI report which is scheduled for release at 12:30 UTC.
If August CPI data shows that inflationary pressures slowed-down, we will see a bearish reaction in the dollar, pushing both EUR/USD and GBP/USD higher. An upside surprise, on the other side, would lead to a stronger dollar as traders pull forward bets on the timing of monetary tightening. At the Jackson Hole Symposium last month, the Federal Reserve led market participants believe that policy makers would wait longer before withdrawing stimulus but there has been speculation in recent days that the Fed may drop a hint of a forthcoming taper announcement at their FOMC meeting next week. This would be dollar-positive. But a hawkish signal will also depend on elevated inflationary pressures.
We could know more in the afternoon.
EUR/USD: The pair was able to stabilize again above 1.18 after testing 1.1770. Above 1.1830 we could see a run for 1.1870-80. Below 1.1790, the pair could test 1.1750.
GBP/USD: Remaining above 1.3750, chances are slightly in favor of a bullish move towards 1.3970. Below 1.3730, the focus shifts to a lower target at 1.3630.
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