FX.co ★ US Dollar Weakens as Inflation Misses Forecasts

The US Dollar Index declined to 98.7, nearing its lowest point in three years at 98.0, a level last recorded in April. This movement followed inflation data that did not meet market expectations, leading to more cautious market sentiment. In May, the US saw a 2.4% year-over-year increase in consumer prices, a slight rise from April's 2.3%, but falling short of the anticipated 2.5%. Over the past year, energy prices dropped by 3.5%, while food prices went up by 2.9%. Core inflation, which strips out food and energy costs, remained unchanged at 2.8%, narrowly missing the expected 2.9%. Despite these figures indicating softer economic performance, inflation continues to stay above the Federal Reserve’s 2.0% target. This situation underscores the belief that policymakers will remain cautious about reducing interest rates, notwithstanding renewed calls from President Trump. On another note, President Trump declared that a trade deal with China has been reached after discussions in London this week, though it is pending formal ratification.