Dollar Gains on In-Line CPI Data, Rate Hike Bets Trimmed
The dollar strengthened on Wednesday after U.S. consumer price inflation matched economists' expectations in July, but traders trimmed their bets on a Federal Reserve rate hike.
According to data released on Wednesday, the Consumer Price Index (CPI) advanced 3.4% over the past 12 months through July, following a 3.5% increase in June. Core CPI increased 2.5% during this period after climbing 2.6% in June.
Traders had been expecting a rate hike at the Federal Reserve's September meeting, but the jobs report released on Friday showed employers unexpectedly shed jobs in July. This led to traders pushing back their expectations for a rate increase.
As a result, Fed funds futures traders now price in 40% odds of a September rate hike, down from 44% before Wednesday's data and from 55% a week ago. Marc Chandler, chief market strategist at Bannockburn Global Forex, noted that the dollar didn't react much to the soft CPI data.