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 Inflation & FOMC On WatchAll eyes are on the US Dollar today. The release of the May CPI and the June FOMC falling on the same day creates a powerful volatility risk that has the potential to drive important shifts across markets today, all dependent on how USD reacts. If we see stickiness or a lift in inflation, couple with a hawkish Fed message, this should send USD higher, creating a deeper drag across risk markets (stocks, commodities, commodity currencies, crypto).  However, any surprise drop in CPI and a more dovish message from the Fed could see USD heading lower, allowing risk markets to recover.
 Hawkish FOMC RisksRegardless of how inflation plays out today, the most important factor will be the Fed, particularly given that we will receive update economic forecasts today and an update dot plot forecasts. In terms of hawkish risks today (bullish USD), the obvious ones are around the inflation forecast and dot-plot. If the Fed downgrades its projected number of rate cuts from 3 to 2, or even less, this will be a hawkish development. An accompanying lift in the CPI outlook will also be a hawkish move, keeping USD supported and weighing on risk markets.
 Dovish FOMC RisksIn terms of dovish risks, these are likely to stem from Powell’s messaging and guidance. USD has been lower on the day following the last four FOMC events, due to Powells post-meeting comments. If we see Powell reaffirming a desire to ease rates, particularly if we see a weaker CPI release ahead of the meeting, this should bolster near-term easing expectations (September), leaning on USD and pushing risk markets higher.
 Technical ViewsDXY The rally in DXY off the 104.05 level has seen the market breaking back above the 104.97 level and back into the bull channel. While above this area and with momentum studies turning higher, focus is on a continued push with 107.04 the primary upside target for bulls. To the downside, 104.05 remains key support to note. More By This Author:Gold Market Commentary – Wednesday, June 12Crude Oil Commentary – Tuesday, June 11UK Market Commentary – Tuesday, June 11

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