The U.S. dollar experienced a decline on Wednesday following the release of the consumer-price index for June, which indicated a slowdown in the rate of inflation to its lowest level since 2021.
According to Dow Jones Market Data, the ICE U.S. Dollar Index DXY, a measurement of the currency against six major rivals, dropped to 100.69 on Wednesday, marking its lowest level since April 2022.
Matthew Ryan, head of market strategy at global financial services firm Ebury, emphasized that the dollar’s decline was bolstered by the weak U.S. inflation report. He stated, “The dollar selling off across the board after today’s soft US inflation report intensified bets that the Federal Reserve’s rate hike cycle may soon be nearing an end.”
Data revealed that U.S. consumer prices only rose by a modest 0.2% in June, falling below the 0.3% gain predicted by economists polled by The Wall Street Journal. Furthermore, the yearly rate of inflation decelerated to 3% from 4% in the previous month, representing its lowest level since March 2021.
Although Fed fund futures traders continue to anticipate a 25 basis points increase in the benchmark interest rate during the upcoming Fed meeting, there has been a decrease in expectations for additional rate hikes. According to CME Fed Watch, there is a 12.9% likelihood that the U.S. central bank will raise interest rates again in September, down from 22.3% just a day ago.
Currently, the Fed’s policy rate sits within a range of 5%-5.25%, reaching its highest point since 2007.
In contrast to the decline in the dollar, U.S. stocks experienced gains on Wednesday. FactSet data indicates that the Dow Jones Industrial Average (DJIA) was up 0.8%, the S&P 500 (SPX) rose by 1%, and the Nasdaq Composite (COMP) gained 1.3%.