Dollar Collapses After Lesser-Than-Anticipated U.S. Inflation Data

The Dollar fell more than 1 percent today, following a cooler-than-expected inflation report for July, which increased the expectations of a lesser rate hike cycle than the previous anticipation from the Feds.

U.S. consumer prices increased in July due to the scarcity and increase in the price of gasoline, causing relief for Americans who have watched inflation climb over the past two years.

The dollar index was down 1.128% at 105.15 at 9:00 a.m. Eastern time (1300 GMT).

Edward Moya, a senior market analyst at Oanda, said, “This is good news for FX traders, as it was a pretty clear reaction, and you will probably see that there still should be some follow-through.”

The Fed has indicated that the CPI growth will have to decline consistently before it lets up on the increasingly aggressive monetary policy tightening it has delivered to tame inflation currently running at four-decade highs.

“They will be debating whether it’s a half-point increase or 75 (basis points), but I think the risk of much more aggressive tightening is now off the table,” said Moya.

The euro climbed 1.1% to $1.0325, sterling gained 1.17% to $1.2216, and the dollar also lost 1.12% on the Swiss franc, which traded at 0.9428 per greenback.

The greenback gained 1.38% versus the Japanese yen to 133.2 yen.

The risky Australian dollar was up 1.32% at $0.7054.

Bitcoin was thrown off-balance by a drumbeat of cryptocurrency fund wipeouts and thefts over recent months and was up 3.61% at $24,000.

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