U.S. inflation data cools, market bets on the probability of the Fed raising interest rates decline, and the dollar weakens under pressure
June CPI data tests the Fed's prospects for interest rate cuts, and new Fed Chairman Warsh attends the hearing The U.S. dollar traded within a narrow range on Wednesday, after weakening sharply the day before. U.S. inflation data fell short of expectations, weakening market expectations for the Federal Reserve to raise interest rates in the short term; although high oil prices still pose the potential risk of pushing up inflation, the confidence of dollar bulls has been dampened. The U.S. dollar was trading at 162.24 yen; the euro and the pound rose slightly by about 0.1%, trading at $1.1428 and $1.3406 respectively. The ICE U.S. Dollar Index, which measures the U.S. dollar against a basket of six major currencies, was flat on the day at 100.9. It fell 0.4% in the previous session, marking its biggest one-day retracement in nearly two weeks and falling back from its highs since July 2. Data released on Tuesday showed that U.S. household inflation cooled more than market expectations in June, with the year-on-year CPI growth falling to 3.5%; dragged down by a fall in energy prices, the CPI fell 0.4% month-on-month, marking the first month-on-month decline since April 2020. The inflation data was significantly lower than expected, U.S. Treasury yields fell simultaneously, and market sentiment on the Federal Reserve's short-term interest rate hikes cooled. The 2-year U.S. Treasury yield fell 9 basis points from a 16-month high. Chris Turner, the group's head of global markets, said: "Previously, the market was unanimously certain that the Federal Reserve would raise interest rates in September. Now this inflation data has caused a clear divergence in market expectations." Turner added that the Fed needs to see more data on weakening inflation before it completely rules out the possibility of subsequent interest rate hikes this year. "In the short term, market expectations for the Federal Reserve's tightening policy will continue to ferment... Therefore, the dollar is expected to remain volatile, and subsequent trends will depend on changes in energy prices." New Federal Reserve Chairman Kevin Warsh stated at a hearing of the House Financial Services Committee on Tuesday that the central bank will never allow inflation to remain high for a long time; he will continue to perform his duties even under pressure from U.S. President Trump. Refinitiv data shows that traders are currently pricing in a probability of about 65% for the Federal Reserve to raise interest rates in September, and the possibility of raising interest rates within this month has been basically ruled out by the market. Market focus: Geopolitical situation in the Middle East The conflict with Iran in the Gulf region has escalated again, oil prices have returned to one-month highs, and the risk of upward inflation continues to exist. Trump on Tuesday restarted a naval blockade of all Iranian ports; the U.S. military said it had launched a new round of strikes to continue to weaken Iran's military capabilities for attacking merchant ships in the Strait of Hormuz. In terms of other currencies: Norway's core inflation cooled more than expected in June, the central bank's pressure to raise interest rates next month eased, and the Norwegian krone weakened simultaneously against the euro and the U.S. dollar. The New Zealand dollar saw strong buying at $0.5815, hovering at a one-month high, while the Australian dollar edged higher to $0.6985. China's economic growth slowed sharply to 4.3% in the second quarter, but the market expected more domestic policies to stabilize growth, and the yuan briefly surged to a one-month high. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed