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Today brings the key data of the week – the US Consumer Price Index (CPI) report. Economists at MUFG Bank analyze how inflation figures could impact the US Dollar (USD).
A good inflation print today will likely be enough to halt the move higher in short-term yields but it would take a substantially weaker CPI print to prompt a deeper plunge in yields that would drag the Dollar weaker.
A March rate cut looks like a lost cause now but a very weak CPI print will see May very much back in play. But with the ECB still not dismissing an April cut completely we see limited scope for Dollar weakness.
A strong CPI print looks more likely to prompt a bigger Dollar move to the upside as a May cut would be put in further doubt.
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