Dollar Slips to One-Month Low as CPI Cools, Fed Cut Bets Rise
The dollar fell to a one-month low after a softer CPI print pushed traders to price in a higher chance of Fed rate cuts next year. EUR/USD climbed above 1.1050.
Alpha Score of 44 reflects weak overall profile with weak value, strong quality. Based on 2 of 4 signals – score is capped at 75 until remaining data ingests.
The dollar hit its weakest level in a month Wednesday after a softer-than-expected US inflation reading pushed traders to price in a higher chance of rate cuts next year.
The dollar index fell 0.6% to 103.80, its lowest since mid-July. Core CPI rose 4.7% year-on-year in July, below the 4.8% consensus and down from 4.8% in June. The two-year Treasury yield dropped 12 basis points to 4.76%, its biggest single-day decline in three months. Lower yields erode the dollar's carry advantage, which has been a key driver of its rally this year.
EUR/USD climbed above 1.1050 for the first time since early August. GBP/USD tested 1.2800. The yen strengthened as USD/JPY fell below 142.00, reflecting the narrowing US-Japan rate differential.
Commodity currencies gained alongside the dollar's slide. AUD/USD rose 0.7% to 0.6550. NZD/USD added 0.5%. Gold jumped 1.2% to $1,960 an ounce, its highest in three weeks, as real yields fell.
Markets now assign a 55% probability to a rate cut by May 2024, up from 40% before the CPI release, according to CME FedWatch data. Thursday's weekly jobless claims will be the next test for the dollar.
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