Dollar Index Holds Near 99.72 as Markets Await US CPI

The US Dollar Index sits at 99.7210, up a marginal 0.05% on the day, reflecting a broadly rangebound session. Equities were soft-to-mixed: the S&P 500 slipped 0.24%, the Nasdaq fell 0.87%, and the Dow eased 0.11%, while the VIX dropped 0.83% to 16.70. Gold fell 0.48% to 4369.14 and silver dropped 1.80%. Treasury yields were mostly a touch lower, with the 10-year off 1.3bp to 4.686% and the 5-year down 1.4bp to 4.391%, while the 3-month edged up 1.2bp to 3.730%. Fed's Goolsbee flagged inflation as the biggest problem facing the economy. The dominant catalyst ahead is tonight's US July CPI report.

The Fed funds target remains 3.50-3.75%, with the live policy debate centred on whether the Fed hikes further, not whether it cuts. Yields were mixed but modest: 10-year -1.3bp to 4.686%, 5-year -1.4bp to 4.391%, 30-year -0.8bp to 5.235%, and 3-month +1.2bp to 3.730% — a small, not decisively dollar-negative, move. The Treasury sold $75 billion in 3-year notes at a high yield of 4.291%. Recent US data has run firm: NFIB small business optimism printed 99.8 versus 97.5 expected, and existing home sales came in at 4.06m versus 4.05m expected. The next major test is US July CPI, due 22:30, with core CPI forecast at 0.2% m/m (prior 0.0%) and 2.5% y/y (prior 2.6%), and headline CPI forecast at 0.1% m/m (prior -0.4%) and 3.4% y/y (prior 3.5%).

EUR/USD: 1.1538, -0.04%, easing after touching a seven-week high near 1.157 on Monday. GBP/USD: 1.3502, -0.04%, little changed after a roughly three-week high near 1.3526 Monday, with the Bank of England on hold at 3.75% since July 29 and no MPC meeting this week. USD/JPY: 159.31, flat, consolidating just under 160 with the BoJ holding at 1.00% on July 31 and Governor Ueda flagging a possible September hike. USD/CAD: 1.3922, -0.13%, softer as WTI crude rose 1.21% and Brent gained 1.15%, with oil firmness lining up with the pair's pullback; no fresh Bank of Canada input today.

EUR/USD trades at 1.1538, down 0.04% on the day, easing after touching a seven-week high near 1.157 on Monday, August 10. The pullback is marginal and sits within a multi-week range rather than signalling a new trend. Background support has come from eurozone growth resilience — Eurostat's flash estimate showed Q2 GDP grew 0.4% q/q — while the ECB, having raised its deposit rate 25bp to 2.25% in June, held rates at that level on July 22-23, with markets now watching the next Governing Council meeting on September 10 for a possible further move. Over the trailing month the pair has gained roughly 1.4%. No eurozone data is due today; the pair's next move rests on this evening's US CPI print rather than any European release.

Key releases: German Final CPI m/m at 16:00 (forecast 0.8%, prior 0.8%); Japan Prelim Machine Tool Orders y/y at 16:00 (prior 52.8%); German 30-year Bond Auction at 19:34; Canada Building Permits m/m at 22:30 (forecast 0.8%, prior -1.7%); US Core CPI m/m and y/y at 22:30 (forecast 0.2%/2.5%, prior 0.0%/2.6%); US CPI m/m and y/y at 22:30 (forecast 0.1%/3.4%, prior -0.4%/3.5%); US Crude Oil Inventories at 00:30 (forecast -1.5M, prior 2.5M); US 10-year Bond Auction at 03:01; US Federal Budget Balance at 04:00 (forecast -361.2B, prior -120.3B); UK RICS House Price Balance at 09:01; Japan PPI y/y at 09:50; RBA Assistant Governor Kent speaks at 10:15; NZ Inflation Expectations q/q at 13:00.