The markets start to bet on US inflation peaking
The US dollar appreciated to a new high of 110.77 early last week following stronger than expected ISM manufacturing and PMI services data (not really stronger, the survey results were not as weak as expected by prior forecasts). The economic data was seen as supporting justification for the Federal Reserve’s renewed tighter monetary policy attack over recent weeks.
However, since that time the US dollar has retreated back to the 108.50 area on profit-taking and a recovery back up in US equity markets over the last three days. There are signs that the financial and investment markets are starting to question the Fed’s increased hawkish tone in the face of emerging evidence that US inflation increases peaked in July and the annual inflation rate could reduce as fast as it went up over the first six months of this year. We have long held the view that the US dollar uptrend of…
