The US dollar collapsed after weak inflation data

After the US inflation data was released, the dollar experienced a sharp decline.

Inflation has dropped to its lowest level in over two years.

The dollar index surpassed the April "low" and set a new 15-month low.

The euro reached a high of $1.11 for the first time since March 2022 ended.

On Wednesday, July 12, the US Department of Labor released a report indicating that the consumer price index (CPI) in the US had increased by 0.2% in June compared to May, which was lower than the anticipated 0.3% month-on-month growth.

In June, consumer prices rose by 3%, a 1% decrease from the 4% growth seen in the previous month. This was lower than the anticipated 3.1% decline. The annual inflation rate has reached its lowest point in over two years, since March 2021.

House prices rose by 0.4%, accounting for more than 70% of the overall increase in consumer prices. Additionally, food prices increased by 0.1%, and energy prices rose by 0.6%.

In June, the Core Consumer Price Index (Core CPI), not including food and energy prices, increased by 0.2%, failing to meet the predicted growth of 0.3% month-over-month. The annual growth rate of Core CPI also decreased by 0.5% month-over-month to 4.8% year-over-year, which was lower than the anticipated 5% year-over-year.

Partially counterbalancing the increased costs of housing, vehicle insurance, clothing, recreation, and personal care items were reduced prices for communications, used cars and trucks, and household furniture.

The main cause of the low inflation rate is the steep drop in energy prices; for example, gasoline prices have decreased by 26.5% compared to last year.

”Nationwide expects that the Fed will raise rates at its July meeting, however, they could end the hike cycle if there is a continued low inflation rate and a slowdown in economic activity. This would be welcomed by Fed officials, especially with the core consumer price index, however, the current pace is still too high to be calming.

Commerzbank has stated that the demand for the Federal Reserve to increase rates further has significantly decreased, and the rate hike in July may be the last one.

The White House released a statement today, announcing that inflation has dropped for the past twelve months and is now at 3%. This is encouraging news, as it shows that the US economy is still strong despite the decrease in inflation.