Dollar Ticks Higher as Inflation Report Falls Short of Expectations

The US dollar rebounded from its session low to tick higher on Wednesday after the release of the July consumer inflation report, which failed to deliver an upside surprise and reduced expectations for a Federal Reserve rate hike.

According to the data released by the U.S. Bureau of Labor Statistics, headline CPI increased 0.1% month-over-month in July, while cooling on a year-over-year basis to 3.4% from 3.5%. Core CPI also decelerated to 2.5% from 2.6%, matching expectations.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, noted that the in-line readings gave the Fed more breathing room to hold interest rates steady instead of hiking, especially after the weak jobs report on Friday. Interest rate odds reflected this move, with the CME FedWatch tool showing chances of the FOMC holding steady in September ticking up to 62% from 54%.

Meanwhile, Brent crude futures briefly touched $90 a barrel amid ongoing tensions over the Strait of Hormuz, as both the US and Iran continued to claim control over the vital waterway.