Home›Forex›Major Pairs›Dollar steadies as softer US inflation clashes with oi…

Dollar steadies as softer US inflation clashes with oil-driven inflation risk

June CPI and PPI came in sharply lower, but a renewed US-Iran escalation lifted crude, reviving concerns that disinflation could unwind.

Reported · Written up by our desk · Major Pairs

The US dollar finished the week without a clear trend as markets weighed a fresh wave of softer inflation data against a separate risk to the outlook from energy prices. In its weekly take, Action Forex said June CPI and PPI both surprised to the downside, reinforcing the view that US price pressures were easing.

According to Action Forex, headline CPI fell 0.4% month over month in June after rising 0.5% in May, pulling the year-over-year pace from 4.2% to 3.5%. Core CPI was unchanged on the month, with the annual rate slowing from 2.9% to 2.6%, while wholesale inflation eased as PPI declined 0.3% month over month, its biggest monthly drop in more than six years.

The dollar’s hesitation reflected how quickly markets shifted focus from what inflation had already done to what it might do next. Action Forex linked a renewed escalation in the US-Iran conflict to a sharp oil rebound, saying Brent closed above $88 and WTI regained the $80 level, and noting that June’s softer inflation was driven in large part by falling energy prices.

Action Forex also tied the setup to expectations for further Fed tightening, saying Fed funds futures moved quickly with the implied probability of a September rate hike dropping from around 70%. Still, the report said higher oil prices raised the risk that inflation could reaccelerate, leaving the currency caught between two opposing forces.

Latest closeWTI crude $79.00 ▼0.8%|Brent $84.94 ▼0.0%

More like this

Sources