Dollar Pauses Amid Tame US Inflation Data

The US dollar experienced a pause on Thursday following an unexpectedly benign reading of consumer inflation. The news prompted traders to reassess their expectations for a September rate hike from the Federal Reserve, which now stands at around 40%, down from 54% last week.

Data released on Wednesday showed that US consumer prices increased by just 0.1% in July, matching economists' forecasts. This modest rise led money markets to reduce their odds of a rate hike, according to CME Group's FedWatch.

The dollar remains up 0.4% against a basket of major currencies this week, but its gain is not as substantial as it seems, considering the typically thin trading activity in August. The currency has been affected by various economic developments worldwide, including the UK's unexpected GDP growth and Norway's interest rate decision.

As for the UK economy, data revealed that it expanded by 0.4% quarter-on-quarter in June, thanks to a dip in energy prices and the start of the men's soccer World Cup. This news strengthened the pound, while the dollar slipped within a narrow range typical for August trading.