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USD Waiting for CPI - TD Securities

FXStreet (Łódź) - The TD Securities team of experts suggest that market volatility could rise later in the week, following the September US CPI numbers release on Wednesday.

Key quotes

"If the end of QE does anything, it seems likely to give rise to a period of heightened (relative to recent years) volatility as asset markets are left to find their own level while the Fed winds down its non-conventional monetary policy and before the ECB really gets going with its QE programme."

"Range-trading may prevail today ahead of the US CPI data Wednesday; if anything ruffles the markets this week, it may well be soft inflation data from the US Wednesday (note TD, market expect unch m/m, +1.6% y/y for headline and +0.1%, +1.7% y/y for core)."

"We don’t think it will alter the Fed’s current policy trajectory at all—QE is done at the end of this month—but it might make the markets a little more concerned about the impact of a strong USD and prompt further speculation about when the Fed will eventually tighten—either one or the other could help get a correction in the USD that we still think may be seen in the next few weeks going."

"Lower US yields, a turn in relative data expectations (fewer positive US data surprises), aggressive net long USD spec market positioning and technical factors all suggest that a modest dip in the USD might be seen into year-end (the USD has dropped more than 60% of the time in December since 1974)."

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