The US Dollar is showing mixed results against major currencies as data releases approach. The Pound Sterling and Swiss Franc are doing well, while the Euro and Japanese Yen are slightly down. The Australian Dollar has struggled after the Reserve Bank of Australia cut rates by 25 basis points to 3.60%. US CPI data will be released soon. It’s expected that July’s headline prices will rise by 0.2% and core CPI by 0.3%. This could change the year-over-year headline inflation rate to 2.8% and core inflation to 3.0%. These figures highlight ongoing challenges due to rising prices, especially for lower-income households, as the Federal Reserve considers its policy amid a potential slowdown in the job market.

Impact On The US Dollar

Strong inflation data could slightly boost the USD, while weak data may hurt it. Rising inflation could negatively impact stock markets and lessen the chances of easing measures by the Federal Reserve. Other factors influencing the market include comments from Fed representatives and upcoming data, like Japan’s PPI figures. The DXY Index is currently stable, with clear support and resistance levels identified. Looking back, the market was focused on a potential headline inflation of 2.8%. This period marked the start of stubborn inflation that has influenced policy for the past year. Now, with the latest July 2025 figures showing a persistent 3.1% annual rate, things have changed. As a result, the Federal Reserve is taking a “higher-for-longer” approach, keeping the federal funds rate between 5.00% and 5.25%. This strategy has strengthened the US Dollar significantly in recent months. The DXY is now trading around 106.5, which is much higher than when the previous data was first released.

Central Bank Policy Divergence

Recall that the Reserve Bank of Australia lowered its rate to 3.60%, leading to a divergence in central bank policies. This trend has continued, with the RBA’s cash rate now at 3.10% as of their August 2025 meeting. This ongoing gap suggests that strategies favoring further US Dollar strength against the Australian Dollar remain appealing. In the coming weeks, we expect increased implied volatility among major currency pairs, especially ahead of the late August Jackson Hole symposium. Traders are likely using options to protect against unexpected announcements from Fed officials. Thus, buying straddles or strangles on the EUR/USD could be a smart way to navigate this uncertainty. Create your live VT Markets account and start trading now.

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