Thoughts on CPI and $USDX positioning into next week
Watching the $USDX at 25.57 this morning, up a bit, makes me wonder if the market's getting a bit too comfy with the 'soft landing' narrative for next week's CPI print. We've seen this movie before, haven't we? A stronger dollar, even marginally, can put a real squeeze on commodities, but more importantly, it's a tell for where the smart money thinks rates are headed. If CPI comes in hot, or even just 'less cool' than expected, that 25.57 on the $USDX could start looking like a bargain. I'm keeping a close eye on the rates complex and wouldn't be surprised to see a sudden pivot in sentiment if the numbers don't perfectly align with the current dovish dreams. Still not touching ASML, even with its current bounce to 1847.9; just seems too much baked in for a company that relies heavily on global capex, which always feels like the first thing to get trimmed when things tighten up.
I agree, the market seems to be pricing in a soft landing, but a strong dollar ahead of CPI certainly hints that some smart money might be hedging against a hotter print. It'll be interesting to see if commodities react sharply next week if that's the case.