Global FX: CPI/ USD, Model take-aways, EM rundown
The desk maintains a cautiously bullish stance on the USD, balancing recent soft CPI data against persistent hawkish signals from the Federal Reserve. Per the full note source, while the CPI print suggests moderating inflationary pressures, the Fed's commitment to tightening policy supports a stronger dollar outlook. The ongoing divergence between U.S. monetary policy and that of other central banks is expected to reinforce this trend, particularly in the short term.
What the desk is arguing
The desk frames this as a prudent moment for USD positioning against EM currencies, especially within Latam and EMEA. Moving forward, the interplay between inflation data and Fed hawkishness will be critical in shaping market dynamics.
Supporting this view, J.P. Morgan highlights the systematic model outcomes which suggest that, despite softer inflation signals, demand for USD remains robust due to rate differentials. The latest data reveals a CPI reading of 2.3%, prompting dialogue around future Fed meetings and their likely interest rate trajectory.
The alternative read would be that any signs of stronger-than-expected global growth could overshadow these concerns, driving investors back to risk-on assets, which would undermine USD strength.
Where it sits in our coverage
Our consensus target for the USD stands at 1.075, within a range of 1.04 to 1.12. Specific targets from relevant firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns closely with jpmorgan, indicating a more bullish outlook compared to bofa, which occupies the lower end of projections. The desk's stance is notably at the upper end of the spread, reflecting expectations of a stronger USD in the coming months.
How other firms see it
Aligned firms such as jpmorgan and others see the USD benefiting from current economic conditions. In contrast, bofa represents a more cautious perspective, projecting a lower target.
Watch the USD/JPY trajectory as it may mirror the Fed's rate path and offer insights into the broader risk sentiment in the market. Additionally, upcoming GDP releases from key EM economies could drive market reactions, impacting USD positions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The USD outlook is cautiously bullish despite soft CPI data.
- 02Fed hawkishness continues to underpin demand for the dollar.
- 03Expect volatility in EM currencies, particularly in Latam and EMEA.
- 04Rate differentials will play a significant role in USD performance.
Market implications
Traders should watch the 1.075 level as a potential resistance point for the USD. Additionally, monitor any shifts in Fed communications to gauge future rate decisions in light of inflation trends and economic growth indicators.
Risks to this view
A shift in inflation dynamics toward a more pronounced downward trend could lead to a reevaluation of Fed policy, potentially reversing the current bullish USD stance. Conversely, significant improvements in global growth metrics may distract investors from USD fundamentals, prompting a risk-on shift.
We discuss USD take-aways from the soft CPI print countered by Fed hawkishness, main take-aways from our suite of systematic models and key drivers/ views in EM with focus on Latam and EMEA. Speakers Meera Chandan, Global FX Strategy Patrick Locke, Global FX Strategy Antonin Delair, Global FX Strategy Anezka Christovova, Head of EMEA EM Local Markets Strategy This podcast was recorded on 17 July 2026. This communication is provided for information purposes only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5369697-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
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Sources & References
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