Dollar Stumbles on Cold CPI
The US Dollar Index weakened on Tuesday (July 14th) after lower-than-expected US inflation data came out. The DXY fell around 0.4% to 100.90, as markets assessed that inflationary pressures were easing and the likelihood of a Fed rate hike in the near future was also diminishing.
US CPI data showed that headline inflation fell 0.4% month-on-month in June and slowed to 3.5% year-on-year. Meanwhile, core CPI was unchanged month-on-month and fell to 2.6% year-on-year. These figures signal that price pressures are starting to become more manageable.
Chicago Fed President Austan Goolsbee called this inflation report quite surprising because it appeared benign, especially in the services component. However, he cautioned the market against jumping to conclusions based on just one data item, as the Fed still needs several similar reports to be more confident that inflation is truly declining.
The weakening dollar boosted other major currencies. EUR/USD rose towards 1.1420, GBP/USD strengthened to around 1.3390, while AUD/USD jumped to the 0.6970 area, helped by a weaker dollar and rising commodity prices. USD/JPY fell to around 162.20, although the yen remained near its weakest level in decades.
In commodity markets, WTI rose around 2.1% to near US$79.60 per barrel due to geopolitical concerns after President Donald Trump announced a new blockade on ships heading to and from Iranian ports. Meanwhile, gold also strengthened by around 1.3% to the US$4,053 area, supported by a weaker dollar, cooler inflation data, and uncertainty over global energy supplies.
The market's next focus will be on the US Producer Price Index (PPI) data, the Empire State Manufacturing Index, the second day of testimony by Fed Chairman Kevin Warsh, and the Fed's Beige Book. If further data shows easing inflation, the dollar could remain under pressure. However, if oil prices continue to rise, concerns about energy inflation could further limit dollar weakness.
Source: Newsmaker.id
