As Currency Strategist John Kicklighter discussed this morning, US data was broadly bearish for the greenback. Indeed, the trade deficit widened, jobless claims rose, and import price inflation fell at the fastest rate since record-keeping began 19 years ago. However, the US dollar still remains strong across the majors as pairs like EUR/USD and GBP/USD consolidate above critical support levels. The dollar’s strength may only be able to last so long, though, as fed fund futures shifted today to price in a mild 10 percent chance of a 25bp rate cut on September 16. The odds still remain wildly in favor of neutral policy through the end of the year, but with the markets now speculating over the possibility of the rate cut, it will become harder to justify remaining dollar bullish in coming days.
[B]Fed Fund Futures
[/B][I]Source: Bloomberg[/I]