July US CPI data matched expectations, reducing pressure on the Federal Reserve to raise rates aggressively in September.
EUR/USD climbed to 1.1530 in Asian trading, ending a three-day decline as the US Dollar weakened following softer-than-feared inflation data. The Bureau of Labor Statistics reported July headline CPI at 3.4% year-over-year, down from 3.5% in June, while core CPI rose 2.5%, matching forecasts.
The modest 0.1% month-over-month increase in headline CPI was driven by retreating energy prices, with gasoline falling 3% month-over-month, and slowing food inflation. Both headline and core readings aligned with market expectations, easing concerns about persistent price pressures.
Market pricing now reflects a 40.1% chance of a September Fed rate hike, down from earlier expectations, while odds for an October move stand at roughly 60%. The shift follows the cooler inflation print, reducing bets on aggressive monetary tightening.