Dollar Slips to 100.70 as Cooler US CPI Trims Fed Hike Bets

The US Dollar Index closed the last completed session at 100.70, down 0.36%, as a broad dollar selloff followed the BLS June CPI report. Headline inflation fell 0.4% m/m against a forecast of -0.1%, pulling the annual rate to 3.5% from 4.2% and well below the 3.8% consensus. Core CPI was flat on the month, with the annual core rate at 2.6%. The energy index dropped 5.7% m/m. With the live 2026 policy question centred on whether the Fed hikes rather than cuts, the softer print cut bets on further tightening and pressured the dollar broadly. Fed Chair Kevin Warsh testifies before the Senate Banking Committee today.

US yields eased across the curve: the 10-year fell 2.8bp to 4.581%, the 5-year fell 4.2bp to 4.321%, the 3-month fell 2.8bp to 3.700%, and the 30-year slipped 0.7bp to 5.091%. The moves track the cooler CPI print and reduced bets on further Fed tightening, with the fed funds target still at 3.50-3.75%. Fed Chair Kevin Warsh, testifying before the House Financial Services Committee on July 14, said the inflation rise would be "a thing of the past" if policy is right but cautioned it is not "mission accomplished"; prepared remarks added the Fed has "no tolerance for persistent elevated inflation." Fed's Goolsbee called the June CPI data surprisingly benign. Warsh, Williams, Cook and Musalem are all due to speak today, alongside the Beige Book.

EUR/USD rose 0.38% to 1.1423, tracking the broad dollar move; the pair retested its 200-hour moving average and bounced, per intraday commentary. GBP/USD gained 0.23% to 1.3377, aided by fading UK political uncertainty. USD/JPY eased 0.16% to 162.19, staying close to the yen's roughly 40-year low with intervention risk still only verbal. USD/CAD fell 0.61% to 1.4069 as firmer oil, after the Hormuz-fee episode was reversed, supported the oil-correlated Canadian dollar ahead of today's Bank of Canada decision.

EUR/USD gained 0.38% to 1.1423 in the last completed session, part of the broad dollar selloff that followed the cooler June CPI print. Intraday commentary noted the pair retesting its 200-hour moving average and bouncing, with buyers and sellers described as battling between technical levels. The ECB last moved on June 11, raising its three key rates 25bp; its next decision isn't until July 23, and that meeting carries no new projections. No major euro-area data is confirmed for today - Eurostat's final June HICP doesn't land until July 17. Today's calendar does carry a German 30-year bond auction and euro-area industrial production (forecast 0.3% m/m versus 0.1% prior), plus Bundesbank President Nagel's speech on the euro in a fragmented world, alongside Fed Chair Warsh's Senate testimony.

Central bank focus dominates: the Bank of Canada delivers its rate decision and Monetary Policy Report at 23:45, forecast to hold at 2.25%, followed by a press conference at 00:45. US Core PPI and PPI m/m land at 22:30 (forecast 0.3% and 0.0% respectively), alongside the Empire State Manufacturing Index (forecast 9.3). Fed Chair Warsh's testimony is due at 00:00, with Fed speakers Williams (22:45), Cook (03:00) and Musalem (08:30) also on the wire, plus the Beige Book at 04:00. Elsewhere: euro-area industrial production (19:00), Chinese M2 and new loans (19:33), UK MPC member Pill (20:30), Canadian manufacturing and wholesale sales (22:30), and Australian inflation expectations (11:00).