The US dollar edged higher yesterday, with the USD index up by 0.3%, ahead of CPI numbers today, which are expected to show price increases in July.
Market expectations for a 25bp rate cut in September remain high, hovering near 86%. Should there be an increase in prices, we could see these odds moderate - potentially lending renewed resilience to the US dollar, which has faced headwinds in the wake of nonfarm payrolls earlier this month.
*Daily move - against G10 rates at 7:00 am, 12.08.25
** Indicative rates - interbank rates at 7:00 am, 12.08.25
The Reserve Bank of Australia delivered an anticipated rate reduction to 3.6%, with Governor Bullock striking a balanced tone—foregoing discussion of more substantial easing, emphasising a case-by-case approach to future policy, and reaffirming projections that suggest additional adjustments are still possible before year-end. The bank trimmed its GDP outlook and sees core inflation near the mid-point of its 2–3% target.
In the UK, private sector pay growth slowed again to 4.8% year-on-year in the three months to June. Furthermore payroll employment fell, and vacancies continued to decline. The job market is loosening - but not collapsing - keeping a December BoE rate cut expectations alive, while limiting near-term downside for GBP. But it is worth noting that likely fiscal tightening in the budget will support the case for lower interest rates.
Markets are steady this morning after both the US and China extended their trade truce on tariffs for another 90 days. US CPI is key today, with markets currently expecting a pickup in prices in July. Job numbers from the start of the month put a September rate cut back in play (85% chance) and should the CPI numbers indicate a softening of inflation then odds will likely firm, and we could even see markets price in a larger rate cut in September – which would be USD negative.
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