JULY INFLATION KEY POINTS:
- July U.S. inflation was unchanged month-over-month, well below consensus estimates calling for a 0.2% increase. Compared to one year ago, headline CPI eased to 8.5%, versus 8.7% expected
- Core CPI advanced 0.3% on a seasonally adjusted basis and 5.9% in the last 12 months
- Weakening inflationary pressures are encouraging, but may not be enough to trigger a Fed’s monetary policy pivot in the near term
Most Read: US Dollar Price Action Setups - EUR/USD, GBP/USD, USD/CAD, USD/JPY [1]
Updated at 9:10 am ET
MARKET REACTION
Immediately after the CPI report crossed the wires, U.S. Treasury yields plunged on bets that the rapid slowdown in U.S. inflationary pressures may require less aggressive monetary policy tightening by the Federal Reserve. The sharp pullback in bond yields triggered a significant bearish reaction in the dollar, prompting the DXY[2] index to slump more than 1.1% at the time of writing.
On the other hand, risk assets rallied violently. For example, S&P 500[3] futures jumped more than 1.7% in the pre-market session. Contracts linked to the Nasdaq[4] 100 soared more than 2%. While the data may not yet lead to a Fed pivot, traders are beginning to price a shallower tightening cycle, with the odds of a 75 basis point hike in September sharply reduced in favor of a more measured 50 basis point increase.
S&P 500, NASDAQ 100, US DOLLAR CHART
Original post at 8:40 am ET
Inflationary pressures in the United States moderated at a rapid pace last month in response to a slump in energy costs following a large downward correction in the oil marke[6]t, providing a respite for U.S. households, who have seen their purchasing
