DXY: US Dollar Pulls Back on Cooling US Inflation, Forex Rivals Swing Higher

June PCI showed that price pressures eased further, hitting a cool 3% growth. Traders rotated out of greenback and into other major currencies.

• The US dollar DXY retreated across the board after the latest inflation data showed that price pressures were easing across the US economy. The consumer price index, or CPI, came in at a cool 3% growth in June, down from 3.3% in May, on an annualized basis. Markets cheered the data in their own way — they got rid of the dollar because lower inflation hints at cutting interest rates. And that could knock the greenback’s value.
• In this context, the dollar index, measuring the buck’s strength against a basket of six currencies, dropped 0.9% on Thursday and remained pressured on Friday. The gauge floated around 104.40, down from a Thursday high of 105.00. On the other end of the spectrum, rival players on the forex board made gains. The euro briefly topped $1.09, shooting higher from levels around $1.08. The British pound eyed $1.30.
• It’s a bit more complicated with the Japanese yen. Moments after the inflation release, the USD/JPY pair fell off a cliff. It wiped out more than 2.5% in a matter of minutes, stoking talks of intervention from the Japanese side. The dollar lost about 430 pips to the strengthening yen as the exchange rate dropped to ¥157.30 from a daily peak of ¥161.70. Still, no confirmation has been received if Japan leaned against the dollar.