The US dollar lost ground against other major currencies on Wednesday, leading to the lowest level since January this year at 102.5. This shift was triggered by the release of the US consumer price index, which indicated a decrease in inflation.
Consequently, there is a growing belief that the Federal Reserve will soon implement interest rate reductions.
In July, inflation increased as projected, primarily due to elevated housing-related expenses, as per a Labor Department report released on Wednesday. This development is expected to maintain the possibility of an interest rate reduction in September.
The consumer price index, which gauges the prices of various goods and services, witnessed a 0.2% uptick during the month, leading to a 2.9% annual inflation rate. Economists surveyed by Dow Jones had anticipated figures of 0.2% and 3%, respectively.
Excluding volatile food and energy prices, the core CPI also showed a 0.2% monthly increase and a 3.2% yearly rate, aligning with predictions.
According to the Bureau of Labor Statistics report, the annual inflation rate is the lowest recorded since March 2021, with the core rate hitting its lowest mark since April 2021. In June, headline inflation stood at 3%.
Prior to the announcement of the producer price data, market players were already anticipating a rate cut in September. However, following the recent data release, there was a surge in expectations for a 50 basis-point rate cut. The probability of this heightened from 53% the day before to 56%, as reported by CME Group’s FedWatch Tool.
