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Dollar Stalls Ahead of CPI, Warsh Testimony as Oil Rally Fails to Break $80

Forex▼ Bearish

Dollar Stalls Ahead of CPI, Warsh Testimony as Oil Rally Fails to Break $80

2026-07-13 12:35 UTCBy AlphaScala Research DeskSource reporting: Action ForexEditorial standards

Dollar Stalls Ahead of CPI, Warsh Testimony as Oil Rally Fails to Break $80

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Brent stalled below $80 as traders waited for June CPI and Warsh's first Fed testimony. The Dollar failed to rally on Middle East escalation. NZD outperformed on services data.

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Escalation in the Middle East would normally push the Dollar higher. Monday's session told a different story.

Brent crude climbed above $79 after the weekend's expansion of the US-Iran conflict, with Iran widening retaliation across several Gulf states and the US launching its largest strikes of the confrontation. The rally stopped short of $80. Markets did not rebuild aggressive Dollar longs. Traders instead waited for Tuesday's US June CPI report and Kevin Warsh's first congressional testimony as Federal Reserve Chair, two events that could prove more consequential for the policy outlook than the latest geopolitical headlines, several traders said.

The restrained reaction suggests investors are not convinced the escalation will produce a sustained energy shock. Brent has yet to establish itself decisively above $80. Without a convincing break higher in crude, markets have little reason to materially revise inflation expectations or Fed pricing, traders said.

Attention is fixed on an unusually dense sequence of Washington events. June CPI arrives at 12:30 GMT Tuesday. Warsh appears before the House Financial Services Committee roughly 90 minutes later in his first congressional testimony since becoming Fed Chair. The Senate Banking Committee hearing follows Wednesday, giving lawmakers a chance to respond after markets have digested both the inflation data and Warsh's initial comments. The timing gives investors an almost immediate read on how the new Fed Chair interprets a critical inflation report.

Friday's Monetary Policy Report provides the framework for both the CPI release and Warsh's testimony. As the semiannual Humphrey-Hawkins report, it serves as the blueprint for his prepared remarks. The report described the US economy expanding at a solid pace, with Q1 GDP growing at a 2.1% annualized rate supported by strong high-tech investment and a rebound in government spending. Consumer spending remained modest. Residential investment stayed weak. The labor market was broadly stable, with unemployment holding at 4.2% and slowing labor-force growth even as private payroll gains strengthened.

Inflation is the central issue. The report highlighted headline PCE inflation accelerating to 4.1% and core PCE to 3.4%, attributing the increase to tariff-driven import prices, higher energy costs linked to Middle East supply disruptions, and stronger AI-related demand for technology goods. Housing services inflation has continued to ease, suggesting underlying pressures are becoming less broad-based. Tuesday's CPI report will be judged less by the headline figure alone than by whether energy prices and core goods continue to account for most of the inflation strength, the report's framework implies.

Currency markets reflected that cautious positioning. The New Zealand Dollar outperformed after the BusinessNZ Performance of Services Index returned to expansion at 50.6 from 48.0, ending five months of contraction. The Canadian Dollar found support from stronger oil prices ahead of Wednesday's Bank of Canada policy decision. The Euro traded firmer. At the other end, the Yen remained under pressure as optimism surrounding Japan's Government Pension Investment Fund initiative faded after officials clarified there are no immediate plans to revise the fund's benchmark asset allocation. The Swiss Franc and Australian Dollar also lagged. Sterling and the Dollar traded closer to the middle of the performance table as investors preferred to await Tuesday's events.

Brent oil surged above $79 after the US-Iran conflict widened into a multi-country confrontation across the Gulf. Attacks on commercial shipping, Iran's claim that the Strait of Hormuz is closed, and broader retaliation against US-aligned states have raised the risk of prolonged disruption. A firm break above $80.59 could open the way toward $85.67, close to the 55-day EMA at $85.59, technical analysts said.

New Zealand's services sector returned to expansion in June. Strong gains in new orders suggest demand is improving, employment and activity remained below 50, indicating the recovery is still in its early stages. The data reinforce expectations that economic growth is recovering gradually without materially changing the RBNZ's cautious policy outlook.

USD/CHF remains in a range with intraday bias neutral. Support at 0.8009 is intact. A move above 0.8139 would extend the rally from 0.7760 toward the 100% projection of 0.7603 to 0.8041 from 0.7600 at 0.8198. A sustained break of 0.8012 would bring a deeper fall to 0.7909 support instead. In the bigger picture, a medium-term bottom formed at 0.7603, it is still early to call for a bullish trend reversal. As long as the 38.2% retracement of the 0.9200 (2025 high) to 0.7603 decline at 0.8213 holds, the larger downtrend could continue through 0.7603 at a later stage. A firm break of 0.7603 would argue the trend has reversed and turn focus to the 0.8332 support turned resistance (2023 low) for confirmation.