Monetary Policy Vs Foreign Policy
Watchers of the US Dollar may be nursing a little whiplash after yesterday’s afternoon session. CPI despite not being the Fed’s preferred measure of inflation commanded significant attention. Headline inflation month on month rose 0.5% versus a forecast of 0.3%. Core CPI came in closer to forecast once the positive contributions of food and energy were stripped out, recording at 0.4% versus 0.3%. Yields have remained contained in recent sessions despite the threat of inflationary tariff policies.
The Dollar was not so collected in the face of these statistics demonstrating a surge in inflation. Rate cutting expectations were curtailed providing support to the Dollar. The gap higher in the Dollar following the data publication at 13:30 GMT was ultimately short lived. Headlines that Presidents Trump and Putin had agreed to open dialogue regarding Ukraine allowed the Dollar to erase its earlier gains.
President Trump suggests negotiations are due to start immediately creating a risk on attitude in markets. At face value such dynamics will prove to be USD negative. Given the threat to global and US inflation from this conflict, the news also limited the impact of the inflationary reading provided just hours earlier. The second day of Powell’s testimony was also taking place in Congress. In response to the latest inflation read the Chair reiterated the Fed’s view that inflation is still on the way down but it is not quite under control yet.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Waiting for the Fed
Charles Porter
Tue 16 Sep 2025
Waiting for the Fed Mixed messages have been emerging ahead of tomorrow’s monetary policy decision from the Federal Reserve. Here’s a reminder of the rollercoaster that left the Fed’s September decision as one of its move important post-Covid meetings. In the face of cooling inflation, the Fed begins a relatively aggressive interest rate cutting cycle, […]
Daily Brief – 48 Hours
Charles Porter
Thu 11 Sep 2025
48 Hours There has been a noticeable shift in geopolitical risk this week. So how, baring a mild slip lower in EURCHF, have FX markets remained quite so flat? Sure, there have been some contained intraday spikes in some commodity prices but ultimately those legs higher have been thwarted, often in the very same trading […]
Daily Brief – Mixed signals
Charles Porter
Tue 19 Aug 2025
Mixed signals It was not long ago that many investment banks were warning clients of the risk of a slowdown in US equities. Having performed exceptionally well in the aftermath of the pause to Trump’s liberation day tariffs, many market participants warned of the inability of equity values to continue to enable price gains. Volatility […]
