Dollar slides after inflation surprise spooks bulls
By Amanda Cooper
LONDON (Reuters) — A sliding dollar came under more pressure on Thursday, as traders took surprisingly slow U.S. inflation as a signal U.S. interest rate rises will be all but finished by month's end.
U.S. data on Wednesday showed inflation slowed a lot faster than expected last month. That gave rise to the biggest one-day dollar sell-off in five months and left the greenback at its lowest in over a year against the euro and sterling, and at its lowest in over eight years against the Swiss franc.
U.S. core inflation came in at 0.2% in June against market expectations for 0.3%. Headline annual CPI fell to 3% and has been dropping since hitting a peak at 9.6% a year earlier.
Interest rate futures showed markets have fully priced in another rate hike from the Federal Open Market Committee (FOMC) later this month, but expectations of any further increases have faded.
Whether or not the dollar is on a one-way trip lower over the rest of the year remains to be seen, according to City Index markets strategist Fiona Cincotta.
«A lot depends on what we hear from the FOMC in a couple of weeks — that will very much decide the fate of the U.S. dollar and set the tone for the rest of the summer,» she said.
«If there is any hint of dovishness in the Fed, then the dollar bears are going to jump on that and it will be an excuse to continue grinding the dollar lower,» she said, adding she was not convinced the Fed would signal that July's would be the final rate hike.
As traders priced in an end to U.S. rate rises, the narrowing gap between U.S. borrowing rates and those elsewhere drove other currencies, particularly the euro, sterling and the yen higher against the dollar.
The euro headed for a sixth daily gain — its
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