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The U.S. dollar is gaining ground against all major currencies at the start of the North American session, with the New Zealand dollar (NZDUSD) falling 0.89% as the largest mover. The Australian dollar, Canadian dollar, Swiss franc, British pound, Japanese yen, and euro also declined by 0.35% to 0.30%. This weakness follows the Reserve Bank of New Zealand’s recent 25-basis-point rate hike and subsequent profit-taking. Traders are positioning ahead of the June CPI report and Federal Reserve Chair Kevin Warsh’s congressional testimony, both of which could reshape Fed policy expectations. Market participants are trimming risk positions and favoring the dollar in anticipation of potential inflation data surprises and policy signals.
The upcoming CPI data and Warsh’s testimony are critical for markets. If headline CPI rises to 4.2% year-over-year from 3.8%, it could reinforce the case for continued Fed tightening. Conversely, a softer reading might hint at a policy pivot. Traders are also monitoring Fed Governor Waller’s recent comments, which emphasized maintaining restrictive policy unless inflation shows sustained declines. The defensive tone in currency markets reflects uncertainty, with commodity-linked currencies underperforming as investors favor traditional safe havens like the euro and yen.
For MENA investors, the dollar’s strength and Fed policy trajectory will influence Gulf equity valuations and commodity-linked assets. The CPI report and Warsh’s testimony could trigger volatility in USD pairs and regional markets. Traders should watch for deviations in CPI data from expectations and Warsh’s stance on rate hikes. A surprise in inflation or dovish signals could shift USD momentum, while a hawkish tone may extend its gains.
