[MARKET ANALYSIS] DXY is rangebound after ultimately rebounding in the choppy aftermath of the inline CPI report, while attention turns to PPI data
DXY: Flat
- Trades flat and sits around the 100.00 level after rebounding from the initial pressure seen in reaction to the inline July CPI report, which unwound some September rate hike bets, while the recovery was then facilitated by a rebound in the US 2yr yield, considering that a 25bps hike is still fully priced by year-end. Aside from the CPI data, there was little else to drive price action, and participants now look ahead to today's PPI release.
EUR/USD: Flat
- Lingers around the prior day's trough after it gave up ground to the firmer buck in post-CPI whipsawing.
GBP/USD: Flat
- Remains lacklustre after retreating beneath the 1.3500 handle and with participants awaiting UK GDP data.
USD/JPY: Flat
- Takes a breather after yesterday's intraday rebound and return to the 159.00 territory, while there was little reaction seen to the softer-than-expected Japanese PPI data.
Antipodeans: AUD/USD -0.1% / NZD/USD -0.3%
- Marginally weakened after recent price swings and in the absence of major catalysts, while pressure was seen in NZD/USD following softer 1yr and 2yr inflation expectations.
Inline inflation prints tend to produce exactly this shape: an initial knee-jerk that fades once the market confirms the policy path is unchanged, with the dollar's direction then set by the front end of the Treasury curve rather than the data itself. The mechanism here is standard, the 2yr yield rebounding on the view that a year-end hike remains fully priced, which re-anchored DXY after the initial sell-off in September pricing. The distinction that matters in these sequences is between a print that shifts the near-term meeting and one that shifts the terminal rate; an inline number does neither, so ranges reassert. Attention now rotates to PPI, which in past cycles has moved FX only when it challenges the pipeline story the CPI just confirmed, and to the ex-US calendar, where UK GDP and Japanese price data have tended to matter for the crosses only at clear surprises. The yen pair sitting at elevated levels keeps intervention risk in the background, a pattern that has historically capped follow-through rallies rather than reversed them.