More USD weakness if inflation continues to fall in the US over the coming months – Commerzbank

The US Dollar suffered heavy losses on Tuesday after Consume Price Index (CPI) figures continued to soften in November. Economists at Commerzbank expect the greenback to extend its downtrend if inflation continues to fall in the US over the coming month.

Hawkish comments unlikely to fuel the USD 

“It would make sense that the Fed chair not only announces less rapid rate hikes but increasingly talks about the Fed’s rate hike cycle coming to an end soon. He might not want that, as a premature end of the fight against inflation might be a more severe one than a delayed one. However, any hawkish comments he might make might sound more like rear-guard action and thus have less USD-positive effect than at times when inflation pressure was higher.”

“It is understandable and justified that the Dollar eased significantly following the publication of the inflation data yesterday. And that we will see more USD weakness if inflation continues to fall in the US over the coming months.”

See – Fed Preview: Forecasts from 18 major banks, downshift to 50 bps