USD Faces Pressure as Goldman Forecasts Soft July CPI, Fed Cut Odds Rise

The US dollar index is facing downside pressure as Goldman Sachs chief economist Jan Hatzius projects a benign July CPI report, with headline inflation expected at approximately 0.05% month-over-month and core CPI near 0.19%. Both figures would come in at or slightly below market consensus, reinforcing the disinflationary trend that Hatzius says began in June. A softer-than-expected inflation print would significantly ease pressure on the Federal Reserve heading into its September meeting, bolstering expectations for a rate cut. Lower rate expectations typically weigh on the greenback, potentially benefiting pairs such as EUR/USD and GBP/USD. Traders should closely monitor the actual CPI release for confirmation, as any upside surprise could quickly reverse dollar weakness. If the data aligns with Goldman's forecast, the dollar could test nearby support levels against major counterparts, with EUR/USD potentially pushing toward recent resistance zones. The report carries outsized importance given the Fed's data-dependent stance and the proximity to the September FOMC decision, making it a critical catalyst for near-term USD positioning.