Credit Agricole CIB Research discusses the USD outlook ahead of next week's FOMC policy meeting.
"US money markets have lowered chances of a 100bp rate hike at next week’s Fed meeting from about 60% in the straight aftermath of the June US CPI overshoot, to just about 20% at the time of writing. Mixed US activity data and a relatively disappointing start to the Q222 earnings season have possibly tamed expectations of a bolder Fed move, while the first housing figures due out today are unlikely to revive them dramatically," CACIB notes.
"Housing starts and their leading indicator, building permits, have already sharply slowed down since their March April peak, while tomorrow’s existing home sales could confirm that the recent cooling in the US housing market has mainly been a function of lower demand. That is a crucial point Fed’s Christopher Waller highlighted last week as a necessary condition to prevent him from backing a larger 100bp rate hike at next week’s meeting, while until then the USD could keep a close eye on market sentiment and global recession fears," CACIB adds.