• Yesterday’s US CPI data didn’t deliver the dovish surprise markets had priced in. The dollar rallied sharply—its best day in a month—as expectations for near-term Fed cuts faded.
• Markets had been overly speculative, banking on political pressure rather than economic reality to drive the Fed’s hand. But without a cooler-than-expected print, there was no reason to stick with rate-cut bets.
• Today, all eyes turn to the US Producer Price Index (PPI) and the Fed’s Beige Book, both of which could further shape inflation expectations and the dollar’s direction.
• Several Fed officials are speaking today—including Williams, Logan, Bostic, Barkin, and Hammack—offering their final thoughts before the Fed enters its pre-meeting blackout period on July 19.
• EUR/USD dipped further, also pressured by renewed political noise from France. Marine Le Pen’s pushback on fiscal reforms reminded markets of underlying risks, though bond spreads remain stable for now.
• EUR/USD may find support around 1.16, but further USD strength could test the 1.15 level in the coming sessions.
• UK services inflation held steady at 4.7% in June, defying expectations for a slowdown. This limits the BoE’s space for rapid rate cuts, but tomorrow’s jobs data could change that narrative fast.
• GBP traded slightly stronger post-CPI, but gains were capped by uncertainty ahead of Thursday’s labour market release. A weak payroll figure would likely push EUR/GBP back above 0.8700.

What’s Next?
• Markets are slowly waking up to the idea that soft rhetoric won’t be enough to justify rate cuts—actual economic weakness must show up first. The dollar’s resilience suggests that dovish expectations were overdone. From here, unless we see a meaningful deterioration in US jobs or inflation data, USD strength may have further to run.