Wednesday was a day of consolidation with no major market moves in FX and rates as market participants await the key US CPI data. Economists at MUFG Bank analyze how inflation figures could impact the US Dollar.

A big upside surprise is required for a big rates/FX reaction

We suspect a divergence from consensus of 0.2ppt or more on MoM changes will be required for a big move in short-term rates and the Dollar. 

We do have another CPI report before the September FOMC which dilutes the importance of today’s report somewhat. 

With the likes of Fed President Harker this week mentioning possible rate cuts in 2024 as plausible, a big upside surprise is probably required for a big rates/FX reaction