Inflation Falls, Dollar Loses Ground
The US dollar weakened sharply after lower-than-expected US inflation data for June came in. The Bloomberg Dollar Spot Index fell 0.6% to an intraday low on Tuesday (July 14th), after previously strengthening 0.3% in Monday's trading.
Pressure on the dollar arose as CPI data showed US consumer prices fell 0.4% monthly, the first decline since 2020. Meanwhile, core CPI remained unchanged on a monthly basis. This data led the market to lower expectations that the Fed would raise interest rates this month.
US Treasury yields also fell. The two-year yield weakened 10 basis points to 4.19%, as traders began to reduce bets on an imminent Fed rate hike. Market focus now shifts to Fed Chairman Kevin Warsh's testimony to Congress on Tuesday and Wednesday.
Meanwhile, investor attention remains focused on the collapse of the US-Iran ceasefire and shipping tensions in the Strait of Hormuz. Brent prices rose again for a second day, breaking through US$87 per barrel, so the risk of energy inflation has not completely disappeared despite weaker US CPI data this time.
In the G-10 currency market, the New Zealand dollar was the biggest gainer. NZD/USD jumped 1.6% to 0.5841, its highest level since June 16, after Reserve Bank of New Zealand officials signaled that inflation may not fall as expected. EUR/USD rose 0.6% to 1.1454, GBP/USD strengthened 0.6% to 1.3429, while USD/CHF fell as much as 1% to 0.8065.
As for the market impact, the cooler CPI data put pressure on the dollar and supported other major currencies. However, the market has not completely calmed down because oil prices remain high due to the Hormuz conflict. If oil continues to rise, inflation concerns could resurface and limit further dollar weakness. (arl)
Source: Newsmaker.id
