US inflation data matching expectations and softer Fed rate hike bets weigh on the USD, with markets eyeing upcoming payrolls and CPI.
The US Dollar Index fell 0.2% to 101.43 overnight, marking its first decline since the June FOMC meeting. The drop follows May PCE data showing headline and core inflation at 4.1% and 3.4% YoY, aligning with forecasts but remaining above the Fed’s 2% target.
Futures markets now price a 47.5% chance of a September Fed rate hike, down from over 50% post-FOMC. Traders await June’s ISM manufacturing prices paid index, expected to ease to 79 from May’s 82.1, and nonfarm payrolls, forecast at 115k after May’s 175k surprise.
Chicago Fed President Austan Goolsbee noted core inflation remains too high but declined to comment on September’s policy path. Markets will focus on July 14 CPI data for further direction.