U.S. annual inflation rises at lower-than-expected pace
Rate futures price in one rate cut this year
U.S. dollar hit lowest since January 2015 vs Swiss franc
Dollar falls to six-week low vs yen
Euro rises to highest since March 2022 vs dollar
(Adds analyst comment, bullets; updates prices)
The dollar plummeted to its lowest in more than a year on Wednesday after data showed the rise in U.S. consumer prices eased in June, suggesting the Federal Reserve may have to raise interest rates only one more time this year.
The dollar index dropped as low as 100.58, the lowest since April 2022, and was last down nearly 1% at 100.58 =USD , on track for its largest daily percentage loss since early February.
The greenback also hit its lowest against the Swiss franc CHF=EBS since early 2015 after the inflation report. It was last down 1.3% at 0.8676 francs, having fallen to a session low of 0.8660 earlier, its weakest since the Swiss National Bank removed the peg from the Swiss currency in January 2015.
Core U.S. consumer prices rose just 0.2% in June, compared with forecasts for a gain of 0.3%. On an annual basis, U.S. CPI advanced 4.8%, lower than market expectations for a 5% increase. That was also the smallest annual increase in more than two years.
"Today's softer core inflation release reinforces our base case and the market's initial read on the Fed's last rate decision that the U.S. central bank will only be able to hike one further time this cycle," wrote Simon Harvey, head of FX analysis at Monex Europe in London, in emailed comments.
The inflation report "resulted in the dollar extending its post-payrolls decline, with losses continuing to be most visible against currencies that are deeply undervalued and sensitive to U.S. yields, such as the Norwegian crown, Swedish crown, and Japanese yen," he added.
U.S. rate futures still show traders overwhelmingly expect the policy rate to rise a quarter point, to a 5.25%-5.5% range, at the Fed's July 25-26 meeting, but now see about a 25% chance of another rate hike before year's end, down from about 35% before the report.
"The Fed may have talked itself into a corner with a July 26th rate hike. The data don't confirm that they need to actually hike," said Brian Jacobsen, chief economist at Annex Wealth Management, in Menomonee Falls, Wisconsin.
"Since they're stubborn, they'll probably do it anyways. Thankfully the market has been expecting that hike. The end is near for hikes."
Against the yen, the dollar dropped to a six-week low of 138.17 yen JPY=EBS . It last changed hands at 138.21, down 1.5%.
The euro surged to its highest since March last year of $1.1125 EUR=EBS . The single European currency last traded up 1% at $1.1124.
Sterling struck a fresh 15-month high of $1.30 GBP=EBS , last trading up 0.5% at $1.2994. The pound is being driven by expectations for the Bank of England to deliver more rate rises to tame UK inflation, which is the highest of any major economy.
======================================================== Currency bid prices at 12:12PM (1612 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 100.5700 101.6000 -1.00% -2.822% +101.6100 +100.5600 Euro/Dollar EUR=EBS $1.1126 $1.1010 +1.07% +3.85% +$1.1129 +$1.1008 Dollar/Yen JPY=EBS 138.2650 140.3800 -1.52% +5.44% +140.3400 +138.1700 Euro/Yen EURJPY= 153.84 154.49 -0.42% +9.65% +154.5200 +153.5200 Dollar/Swiss CHF=EBS 0.8675 0.8794 -1.35% -6.18% +0.8793 +0.8660 Sterling/Dollar GBP=D3 $1.2993 $1.2931 +0.47% +7.43% +$1.3000 +$1.2905 Dollar/Canadian CAD=D3 1.3177 1.3230 -0.40% -2.74% +1.3234 +1.3144 Aussie/Dollar AUD=D3 $0.6787 $0.6687 +1.48% -0.45% +$0.6795 +$0.6683 Euro/Swiss EURCHF= 0.9652 0.9679 -0.28% -2.46% +0.9695 +0.9629 Euro/Sterling EURGBP= 0.8561 0.8511 +0.59% -3.20% +0.8565 +0.8506 NZ NZD=D3 $0.6297 $0.6198 +1.59% -0.83% +$0.6299 +$0.6183 Dollar/DollarDollar/Norway NOK=D3 10.1000 10.3530 -2.25% +3.12% +10.3490 +10.1060 Euro/Norway EURNOK= 11.2434 11.3868 -1.26% +7.14% +11.4120 +11.2340 Dollar/Sweden SEK= 10.3995 10.6608 -1.32% -0.08% +10.6696 +10.3835 Euro/Sweden EURSEK= 11.5699 11.7241 -1.32% +3.78% +11.7573 +11.5482 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
