The U.S. dollar remained steady on Thursday as investors assessed the Federal Reserve’s interest-rate outlook following an inflation report that matched expectations. At the same time, oil prices stayed elevated as peace efforts between the United States and Iran showed little progress.
The U.S. Dollar Index traded near 100.03 by 03:24 ET (07:24 GMT), after gaining around 0.2% in the previous session.
U.S. CPI Eases Pressure on the Federal Reserve
Data released on Wednesday showed that U.S. consumer prices rose 0.1% in July, in line with economists’ forecasts.
Annual inflation slowed to 3.4% from 3.5% in June, while core CPI increased 0.2% month-on-month and 2.5% year-on-year.
The report reduced expectations that the Federal Reserve will raise interest rates at its September meeting.
Market-implied odds of a September rate hike fell to around 40%, compared with roughly 54% before the inflation data was released.
MUFG analysts said the latest inflation figures should give the Federal Open Market Committee enough room to keep rates unchanged for now. However, they added that the report may not be strong enough to significantly change policymakers’ current positions.
Dollar Remains Supported Ahead of More U.S. Data
Despite lower expectations for a September rate increase, the dollar remained relatively firm as investors waited for more evidence about the Federal Reserve’s next move.
Attention now turns to upcoming U.S. producer price and retail sales data, which could provide further clues about inflation, consumer demand and the broader economic outlook.
Stronger-than-expected economic figures could support the dollar by reinforcing expectations that U.S. interest rates will remain elevated for longer.
Japanese Yen Remains Under Pressure
The Japanese yen continued to trade near weak levels, with USD/JPY holding around 159.40 and remaining close to a two-week high.
Currency markets remain focused on the yen after Tokyo and Washington confirmed coordinated yen-buying intervention earlier this month.
The intervention was aimed at slowing the Japanese currency’s decline after it reached its weakest levels in around four decades.
Further yen weakness could increase speculation about additional intervention or tighter monetary policy from Japanese authorities.
U.S.-Iran Tensions Keep Oil Prices Elevated
Geopolitical risks also remained an important factor for global markets.
Iran said there had been no meaningful progress in efforts to restore an interim peace agreement with Washington.
The United States has accused Tehran of failing to meet commitments related to reopening a key shipping route, while Iranian officials have argued that Washington has not fulfilled its own obligations.
The renewed tensions kept Brent crude oil near $89 a barrel, increasing concerns that higher energy prices could contribute to imported inflation, particularly across Asian economies.
Australian Dollar Moves Lower
Elsewhere in currency markets, the Australian dollar weakened, with AUD/USD falling around 0.2%.
For now, foreign-exchange traders remain focused on the Federal Reserve’s rate outlook, upcoming U.S. economic data, developments in the Japanese yen and geopolitical tensions affecting global energy markets.
