USD at a crossroads.

Cast your mind back to November 2023, when the 'FED pivot' finally happened (chair Powell's announcement, there would be no more rate hikes). Risk assests rallied strongly and the USD sold off.

Then came 2024, and the start of the year saw strong data release after strong data release. The market realised it had gotten ahead of itself, and the data was too strong for the predicted date of a March rate cut. Accordingly, the dollar has been on the front foot.

The FED needs to see a (slightly) slowing enonomy if it's going to cut rates. When interest rates are cut, credit becomes cheaper. And you can't give people access to cheaper money whilst the economy is strong ( this would risk inflation rising again).

All along, the FED has stressed data dependence. And recently, the data has been too strong to consider USD shorts. But last week's revision lower of CPI, combined with yesterdays very soft retail sales. Has opened the door slightly for a potential weakening of the USD. (Granted, Tuesdays 'hot CPI' goes against this view, but there have been reports suggesting the reading was an anomaly and thus, should be ignored).

Which brings us to today's data release, PPI, which is another inflation metric. For the past four months, the number has come in lower than forecast and if the same happens today we could see a continuation of yesterday's retail sales led weakness.

Of course, trading is rarely simple, and an above consensus number could see a re-emergence of USD strength.

It could be a bumpy few weeks for the USD as the data releases ebb and flow. And currently, I'm prepared to trade the USD in whichever direction the data suggests.