The dollar is stable today with anticipation of US inflation data

The US dollar settled on Wednesday within a narrow range, with a slight upward trend today, in a scene dominated by anticipation and caution, as global markets await the release of US inflation data that will determine the features of the monetary policy of the Federal Reserve (US central bank), not only during its meeting scheduled next week, but throughout the rest of the year.

This state of anticipation comes after the weak US jobs report, released last week, paved the way for the adoption of a more accommodative policy by the US central bank, reinforcing expectations of a rate cut at the July meeting.

The question is no longer whether the Fed will cut interest or not, but the size of this reduction has become the focus of investors ' attention: will it be by 25 basis points as expected, or will the upcoming data push for an even larger cut of 50 basis points?

Inflation data is the real test

The answer to this question will largely depend on how trade tensions and tariffs will affect the course of prices in the world's largest economy.

The inflation tests are scheduled to begin with the release of producer price data on Wednesday, followed by the most important data, the Consumer Price Index report on Thursday.

Currently, market forecasts indicate that traders are almost certainly considering a 25 bps cut next week, while they see the chance of a 50 bps cut exceeding 8%.

The market also expects a total easing of an estimated 66 basis points by the end of the year.

Between expectations and reality

Some analysts believe that the probability of a 50 basis point interest rate cut remains theoretically high, but they point out that achieving this entails an urgent need for a clear and sudden drop in core inflation to provide the Fed with sufficient justification for making this decision.

However, the reality on the ground indicates the opposite, as the prices of services, which are a key component in calculating inflation, remain stable, and the Fed insists on a gradual and cautious approach to its movements, a significant cut next week seems unlikely.

However, inflation data will remain the decisive factor that will determine the strength and pace of market expectations for the course of monetary easing until the end of this year.

This state of waiting and uncertainty has created a largely calm atmosphere in the currency markets during the Asian trading session, as everyone seems to be in a waiting position to find out the next direction of the dollar and global interest rates.