Dollar Whipsaws as US Inflation Remains Nonexistent

The US dollar initially  weakened, and Treasuries rallied after US inflation readings showed softness across the board.  With no headline inflation in place, the Fed’s decision to cut rates should be an easy one at the July meeting.  Odds for a rate cut at the July 31st meeting rose to 75.9%, while the next week’s meeting remained around 20%.  The Fed’s transitory effects could still be lingering and with core figures still hovering at the Fed’s target, the case for a June cut should be off the table.  The core consumer price index which removes energy and food costs climbed 2% from a year earlier missing forecasts, but still posting its fourth straight monthly increase.

The dollar dropped 15 pips to the euro following the data but has settled  near unchanged levels at 1.1318.

Fed funds futures are now indicating a rate of 1.725% at the end of the year.  The yield on 10-year Treasuries slumped 2.8 basis points to 2.115%, while the dollar fell to the weakest levels in almost two months.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya