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Dollar weakens after July CPI eases, September hold odds rise

Markets increased the probability of a September Fed hold to about 58% after headline CPI slowed to 3.4% and core CPI eased to 2.5% year over year.

Reported · Written up by our desk · Major Pairs

The dollar weakened broadly after July consumer price data came in as expected, with headline inflation slowing to 3.4% year over year from 3.5% and core inflation easing to 2.5% from 2.6%, according to Action Forex.

The report shifted rate expectations, with implied odds for a September hold rising to around 58% from roughly 51% a day earlier. In parallel, the 10-year Treasury yield slipped toward 4.66%.

Traders framed the move as evidence that an earlier oil shock did not leave a lasting impact on underlying inflation, noting that core inflation returned to 2.5%, the level seen in January and February before the Iran war disrupted energy markets.

However, Action Forex cautioned that July’s data was measured before the latest Hormuz escalation intensified, with Brent rebounding from about $70 to around $90 and negotiations still stuck. That means the July print closes one chapter, while August CPI on September 11 could test whether the second oil disruption proves more persistent.

Latest closeBrent $89.26 ▲1.8%

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