Dollar fell as U.S. consumer price temper in July

Dollar fell as U.S. consumer price temper in July

The dollar fell on Wednesday after U.S. inflation data showed a slowdown in consumer prices in July, easing pressure on the Federal Reserve to start scaling back its monthly bond purchases. The monthly purchases are one of the Fed’s tools to support the recovery.

The dollar index, which measures the greenback against a basket of major currencies, was down 0.17% at 92.915 at 3:05 p.m. ET.

Earlier, the U.S. currency hit 93.195, its highest since April 1, and not far off of its 2021 high of 93.439, but it sold off after data showed the consumer price index rose 0.5% last month after climbing 0.9% in June. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.

Economists polled by Reuters had forecast a 0.5% rise in the headline measure and a 0.4% rise in the core measure.

While prices are still rising, the Fed said inflationary pressures will gradually ease as supply catches up with demand after months of COVID-19 lockdown.

Looking ahead, Edward Moya, senior market analyst at OANDA in New York, said the Fed’s decision on when to taper its asset purchases will depend on the data.

“Next month’s jobs report will be key, and if it’s not impressive, the tapering could be postponed even before the end of the year,” he said.

In Europe, investor sentiment dipped, with a survey showing conditions in Germany deteriorating for the third month in a row as a global rise in COVID-19 cases unnerving markets.

The euro rose 0.16% to 1.17395 against the dollar, after falling for six consecutive sessions and falling as low as 1.1706 in early European trading, near the year’s low of $1.1704.

Sterling rose 0.2% against the dollar to 1.38645, pulling back from a two-week low.

The yen rose 0.12% to 110.445 yen against the dollar after falling for five consecutive sessions.

In cryptocurrencies, bitcoin hit $46,787.60, its highest level since May 17. Bitcoin was last up 1.5% at $46,304.54, while ether, the second-largest cryptocurrency, was up 2.7% at $3,226.18.

Damon Harrison
Market Analyst, IPG Group