Federal Reserve (Fed) Chair Jay Powell sounded cautiously optimistic on disinflation which, paired with recent PCE data, allows markets to keep betting on a Fed rate cut in September, ING’s analyst Francesco Pesole notes.

Fed minutes less relevant than data

“The US Dollar (USD) traded on the soft side yesterday after Fed Chair Powell's comments in Sintra. As we had expected, he sounded rather upbeat on disinflation, even though he continued to warrant caution on the next policy move.”

“Today, the focus will be on a few important data releases: ADP employment, Jobless claims, and ISM services index for June. Yesterday, job openings for May rose unexpectedly, but the trend continues to point at the kind of “inflection point” in the jobs market described by the Fed’s Mary Daly in a recent comment.”

“The Fed will publish the minutes of the 12 June FOMC meeting. We expect members to voice concerns on inflation, although the market impact may not be very big after Powell’s comments in Sintra and recent encouraging data on disinflation. We see some downside risks for the USD stemming from softer US data, but the euro-heavy DXY may not show that very clearly.”