USD: Watch for FOMC signals of a September rate hike

Better than expected labor data and retail sales during the past couple of weeks are consistent with the view that the Fed will hike in September and that the market consensus/pricing continues to chase the improving US economic picture. 

At the FOMC meeting this week (Wednesday), markets will focus on any possible change in the FOMC's message, which will include new forecasts and Fed Chair  Janet Yellen's press conference. 

Barclays notes:

• We (in line with market consensus) do not anticipate a change in the range of the reference rate at this meeting, but we expect some risks around the possibility that the committee could signal increasing chances of a rate hike during its September meeting. This should continue to support the US dollar in the weeks ahead as Fed Funds futures have priced-in only round 11bp. 
  
  
• In addition, on Thursday we expect headline CPI inflation to remain around 0% y/y, while core should remain closer to the 2% target ,at 1.7%. 
• 
  We are slightly below consensus on housing starts (1060 vs. c.f. 1100) and IP (0.1% m/m vs. c.f. 0.2% m/m) and at consensus on Empire manufacturing (c.f. 5.0).