Dollar drops as inflation continues to cool; Fed September skip confirmed   

  • Dollar falls as Fed rate hike odds soften to 10% for September and 20.2% in November
  • US Annual CPI rose from 3.0% in June to 3.2% in July, snapping a streak of 12 consecutive declines
  • Core CPI (ex-food/energy) fell to 4.7% year-over-year, lowest reading since October 2021

No surprises from the July CPI report

After a roughly in-line inflation report, Wall Street remained optimistic that the Fed won’t need to raise rates in September.  Headline inflation rose but that was mainly due to the large drop we saw last month from the base effects.  Traders focused on the monthly readings and both headline and core saw gains held steady at 0.2%.  Markets are growing confident that the Fed is done raising rates as risk appetite remains intact as stocks rally and the dollar drops. It doesn’t seem likely that we will see a reacceleration with prices given the weakening labor market and as lending takes a hit.  The so-called super core services inflation gauge posted a 0.19% rise from a flat reading in June, but still well below last year’s half-percentage point pace.

Weekly jobless claims also came in higher than expected, which clearly supports the idea that the labor slowdown continues. The weekly first-time filings for unemployment reading rose from 227,000 to 248,000, while continuing claims edged lower from 1.692 million to 1.684 million.

The Fed will have an easy time at Jackson Hole as there wasn’t anything from both the NFP and CPI report that would move members to tightening in September. The focus for the market will shift to rate cuts becoming aggressively priced in for next year, something the Fed will try to push against.

Economic resilience

A Bank of America report showed household credit and debit card spending turned positive for the first time since March. They now expect a soft landing with no US recession.  The big question for markets is what will be the state of the economy in the fall, and whether resilience could drive a reacceleration with pricing pressures.


The euro pullback might be over as the risk of more Fed tightening will get pushed back a couple of months.  The recent EUR/USD slide is hovering around a confluence of support that includes the 50- and -100 day SMAs and an uptrend support line that extends back to September 2022.  If bullish momentum emerges, upside targets include the 1.1250 region.  To the downside, 1.0928 provides initial support.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023.

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. Prior to OANDA he worked with, 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, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.

Ed holds a BA in Economics from Rutgers University.