US Dollar Ahead of Inflation Report Report due at 8:30 ET

US inflation data for July is set to be released today, at 8:30 ET (12:30 GMT). Currency markets are anxiously waiting for this information and what it may indicate regarding the Federal Reserve's monetary policy in the following few months.

Major currencies are holding steady, as traders are waiting for the data in order to glean how steeply interest rates will rise. Inflation in June was 9.1% and economists are predicting a small drop for July – at 8.7%. While the dollar is holding steady, other currencies are doing similar.

The Russian rouble has gained a bit on the dollar yesterday, approximately 0.6%, and is trading in the 59 – 62 range against the dollar for the sixth day in a row. It also gained 0.9% against the euro, trading at 61.67, much better than the 132.43 (the lowest it has been in 2022) against the euro in late February.

This makes the rouble the best performing currency so far in 2022.

Regardless of the predicted drop in inflation in July, the Federal Reserve should still increase interest rates to continue lowering it. According to Dow Jones, economists expect that the consumer price index (CPI) will rise by 0.2%, a drop from a 1.3% rise in June. This would be an indicator that inflation has peaked and may be reined in in the coming months.

According to the current predictions, the US is in for a bit of good economic news, although it will not be felt in all sectors.

“You have about four drivers of inflation right now. You have commodity prices. That’s going away. You have supply chain issues. That’s going away, but you’re still left with housing and the labor market, and that’s going to show up in services inflation,” Aneta Markowska, chief economist at Jefferies stated.

Others are not so confident regarding the long-term situation. Oil prices are an important factor and August has seen some of the lowest prices since the start of the Russia-Ukraine conflict. However, because oil prices are partially dependent on geopolitical events, it is hard to predict their fluctuations until the end of the year.

For now, we need to wait for the inflation data and gauge the Federal Reserve's policy regarding interest rates. We will keep you informed as the situation progresses.