Dollar Hangs Near Two-Month Low Ahead of Crucial Inflation Report

The US dollar has been hovering near its two-month low due to uncertainty surrounding the upcoming July inflation report.

A weaker-than-expected jobs picture released last Friday made a September interest-rate move by the Federal Reserve appear less likely, causing Treasury yields to fall and reducing the odds of such a move in Fed-funds futures from about 67% to around 44%.

Economists predict that core consumer price inflation (core CPI) will rise by 0.2% in July, bringing the annual rate to 2.5%, down from 2.6% in June.

This uncertainty is causing foreign-exchange traders to closely watch the core CPI print and its deviation from expectations, with a softer-than-expected reading potentially narrowing the gap between US cash and bonds and other countries, pressuring the dollar.