Dollar Rises on Benign Inflation Data, Rate Hike Odds Drop
The US dollar experienced a mixed day on Thursday after data revealed a benign reading of US consumer inflation. The overall increase in prices was just 0.1% in July, meeting economists' expectations.
This news prompted traders to reduce their bets on a September rate hike from the Federal Reserve. According to CME Group's FedWatch, the odds of a September rate hike are now at 40%, down from 54% a week ago.
The dollar is still up 0.4% against a basket of major currencies this week and is heading for its first weekly gain in three weeks. However, it remains to be seen whether this trend will continue.
Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, noted that the current situation suggests a more holistic approach to inflationary dynamics, with Fed Chair Kevin Warsh preferring other metrics beyond core PCE.