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US dollar slips as softer June inflation trims yield upside

MUFG said markets largely unwound July Federal Reserve hike pricing after June headline CPI eased to 3.5% year over year, and core CPI to 2.6% year over year.

Reported · Written up by our desk · Major Pairs

Softer June US inflation reduced upside risks to Treasury yields, prompting markets to unwind much of the pricing for a July Federal Reserve hike and dial back expectations for further tightening into 2026, according to MUFG analysis cited by FXStreet.

The inflation data showed headline CPI easing to 3.5% year over year from 4.2%, with the move largely attributed to lower energy prices. Core CPI also slowed to 2.6% year over year from 2.9%, while monthly core inflation was flat, the note said.

Even with that recalibration, MUFG pointed to elevated US real yields and safe haven demand tied to Middle East geopolitical tensions as factors supporting the dollar near term. The US dollar index, DXY, softened by 0.3% following the release.

FXStreet also reported that USD/JPY ended 0.1% lower, after recovering from an intraday decline of around 0.5% triggered by the CPI data.

Latest closeUSD/JPY 162.23 ▲0.2%|Dollar index 100.94 ▼0.3%

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