The dollar has strengthened slightly since the start of the weekend, but there has been nothing resembling an earthquake in markets following the French election results, with currency volatility continuing to ease from a peak reached in mid-June, notes Francesco Pesole, currency strategist at ING.

DXY hovers around 105.00 ahead of Thursday’s CPI report

“Today’s highlight is Federal Reserve (Fed) Chairman Jerome Powell’s testimony before the Senate, which will be repeated in the House of Representatives tomorrow. It will not be simple to tease out substantive policy commentary amidst the often irrelevant questions from policymakers, and the market impact will center around the release of the opening remarks.

“We maintain the view that if there is any departure from the recent narrative, it should be dovish, as Powell may view the June Dot Plot revisions as too hawkish and may want to refine his messaging based on recent data.”

“On the data side, we’ll be closely watching the NFIB’s June Small Business Optimism Index and the Employment Plans Index, which typically leads monthly changes in private payrolls by three months. We see the DXY hovering around 105.00 on Thursday as CPI risks play out, with any dovish surprise from Powell potentially offset by EU policy concerns.”