ING Research discusses the USD outlook in light of this week's US key data releases.
"This week sees the release of US inflation, retail sales and industrial production figures. A note of warning: US data in January should be strong throughout, largely thanks to greatly improved weather conditions compared to December. The big jump in hiring seen in the latest jobs report also suggests increased demand. Indeed, the most important piece of data will be inflation (tomorrow). Our in-house projections are in line with the market consensus for a month-on-month rise of 0.5% and 0.4% for headline and core rates, respectively," ING notes.
"In other words, we don’t expect this setback in the deflationary path to suggest the trend is inverting. Still, this - with the aid of strong retail sales and industrial production figures - will likely be enough to allow markets and FOMC hawks to fully expect a 25bp rate hike in May after the one in March. Any upside surprise may push the peak rate pricing towards the 5.50% mark. From an FX perspective, the dollar appears in a position to at least hang on to recent gains this week. We could see a return to 105.00 in DXY soon," ING adds.
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