The USD is consolidating this week’s gains after yesterday’s data reports interrupted its ascent, with the surprise rise in weekly claims offsetting and overshadowing slightly higher than expected CPI data, Scotiabank’s FX Chief FX Strategist Shaun Osborne notes.

USD seems mixed overall

“As I noted in yesterday’s note, the Fed’s focus is clearly turning from inflation to jobs, so the despite the stalled progress on inflation, and even if there is a weather factor in the jump in the claims data, the Fed still looks likely to cut rates 25bps in November. Fed Governor Bostic’s comment that he would be open to skipping adjusting policy in November helped trim easing bets at the margin but a 1/4 point cut remains close to 80% priced in.”

“Trading is generally quiet in the run up to the long weekend in North America. Movement in the main G10 currencies is limited and mixed—marginal gains for the GBP and EUR and slightly larger intraday losses for the JPY and commodity FX, with mild losses for European stocks and US equity futures weighing on high beta currencies. Major bond markets are a bit weaker across the board and commodities are mixed—crude oil a tad lower while industrial metals are a bit firmer.”

“US PPI data will help inform on core CPE trends but there might be a bit more focus on Fed policymakers’ comments following Bostic’s remarks. Goolsbee, Logan and Bowman are on tap today (only Bowman votes this year). Overall, dollar gains may pause in the short run, or even correct mildly, with the DXY having reached the low end of my bull target range at 103, but the risk of a bit more strength remains and the dollar should remain broadly well supported in dips for now.”