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The greenback strengthened during the Asian trading session and the DXY dollar index rose 15 pips to today's opening price, climbing to 92.36 mark by the time this article was published.
Market participants are awaiting the publication today (at 12:30 GMT) of the latest data on consumer inflation in the United States. The US consumer price index (CPI) is expected to rise 0.5% in June from the previous month (+4.9% on an annualized basis). Economists and market participants will scrutinize the details of the Bureau of Labor Statistics report, especially with regard to the industries most hit by the pandemic and now reviving with the opening of the economy.
Federal Reserve Bank of New York President John Williams said on Monday that the conditions needed to roll back stimulus bond purchases are not yet in place. The central bank wants to see significant further progress in returning the labor market to the state it was in before the coronavirus pandemic. "Obviously, this state has not yet been reached", Williams said.
However, another Fed spokesman, James Bullard, just (while this article was being drafted) said that "now is the right time to wind down the Fed stimulus", and that he still supports a rate hike in late 2022.
June US inflation data is expected to continue to point to an annualized rate of rise in prices above the 2.0% target set by the Federal Reserve.
Inflation expectations jumped from 4% in May to 4.8% in June, the highest ever since the study launched in 2013. Inflationary expectations for the next three years are kept at 3.6%.
The words of central bank officials about the temporary nature of the acceleration in inflation are becoming less convincing. The dollar may receive support as higher-than-expected consumer price inflation signals rising inflationary pressures, prompting Fed officials to begin considering whether to wind down stimulus policies. The rise in inflation in the US forces market participants to take this moment into account, pushing the dollar quotes upward.
Meanwhile, ahead of the meeting on Wednesday of the central bank of New Zealand (the bank's decision on the interest rate will be published at 02:00 GMT), the national currency of this country shows mixed dynamics.
It is expected that the RBNZ will not change the parameters of monetary policy. The RBNZ believes that wage growth remains weak. At the same time, inflationary expectations are declining, and low levels of business confidence indicate a slowdown in hiring and wage growth.
Nevertheless, the comments of the representatives of the bank's management will continue to be very important.
Earlier, the RBNZ stated that against the background of "many factors of uncertainty" monetary policy "will remain soft for the foreseeable future", but "may be adjusted accordingly". According to the bank's management, for a stable recovery of the New Zealand economy and inflation growth, "a lower rate of the New Zealand dollar is needed".
The leaders of the RBNZ are likely to reaffirm their inclination to pursue a soft monetary policy, which will lead to continued pressure on the New Zealand currency.
The New Zealand dollar gained support after the publication (Monday at 22:45 GMT) of the country's food price index, which rose 1.4% in June (against the forecast of +0.1% and 0.4% in May).
At the same time, the NZD / USD pair continues to trade in the area below the key level 0.7020 (see Technical Analysis and Trading Recommendations). If the decline resumes, the breakdown of the support levels 0.6865, 0.6840 may finally push NZD / USD into the bear market zone.
