Dollar's July Slump Continues Despite Friday Rebound

The US dollar's strong rebound on Friday was not enough to offset its monthly decline, which is now expected to be around 1%. The greenback has been weighed down by softer-than-expected inflation data and unclear interest rate signals from the Federal Reserve. Despite rising 0.3% on the day to 101.50, the dollar's US Dollar Index remains headed for a monthly loss.

The June Personal Consumption Expenditures (PCE) price index, which is the Fed's preferred inflation gauge, came in softer than expected. This has reinforced doubts over further US rate hikes, even though core measures remain above the 2% annual target.

In contrast, the euro secured a 0.8% gain for July, thanks to fresh Eurostat data showing Eurozone headline inflation picked up to 2.9% in July from 2.8% in June. This has strengthened the case for the European Central Bank to deliver an interest rate hike at its September 10 meeting.

The Japanese yen fell 0.2% against the dollar on Friday, but still gained 1.6% against the dollar across July - its best monthly performance since October.