Significant upside inflation surprise required to trigger a USD rebound – MUFG

The US Dollar has continued to weaken sharply. A big upside surprise in the US Consumer Price Index (CPI) report due out tomorrow is required to lift the greenback, economists at MUFG Bank report.

Another 25 bps hike next week

“On balance we believe the latest labour market developments favour another 25 bps hike rather than a larger 50 bps hike.” 

“Market attention will now shift to the release of the latest US CPI report tomorrow. It would likely take a significant upside inflation surprise now to revitalize speculation over a larger 50 bps hike at next week’s FOMC meeting and trigger a US Dollar rebound.”