CPI Weakens Dollar, Oil Becomes New Threat
The US dollar held steady in European trading on Wednesday (July 15th) after declining in the previous session. Pressure on the dollar eased after weaker-than-expected US inflation data led markets to reduce bets on an imminent Fed interest rate hike.
The US dollar index stood at 100.9 after previously falling 0.4%, its biggest decline in nearly two weeks. Against the yen, the dollar traded around 162.24. Meanwhile, the euro and the pound sterling strengthened slightly to US$1.1428 and US$1.3406, respectively.
US inflation data showed the annual CPI slowed to 3.5% in June. On a monthly basis, the headline CPI fell 0.4%, marking the first decline since April 2020, primarily due to weakening energy prices.
US Treasury yields also fell after the cooler inflation data dampened expectations of an imminent interest rate hike. The 2-year Treasury yield fell nine basis points from its 16-month high, indicating the market is becoming more convinced that a July rate hike is unlikely.
However, Fed Chairman Kevin Warsh maintained a firm tone in his testimony before the House Financial Services Committee. He said the central bank has no tolerance for persistently high inflation. The market now prices a roughly 65% chance of a September rate hike.
Investors' focus is also on the Middle East after tensions over Iran pushed oil prices to a one-month high. Trump reimposed a naval blockade on Iranian ports, while the US military continued its strikes to weaken Iran's ability to attack commercial shipping in the Strait of Hormuz. As a result, the dollar remains supported by the subdued CPI, but oil and inflation risks from the Gulf conflict could still limit its decline. (arl)
Source: Newsmaker.id
