Key facts
- US inflation rose 0.3% last month, below the 0.4% forecast.
- The dollar index was flat at 101.47.
- The euro was flat at $1.133050.
- The dollar was flat against the yen at 157.34.
- Sterling strengthened 0.26% to $1.3265.
- The 2-year Treasury note yield was down 0.4 basis points at 4.885%.
The dollar traded flat against major currencies on Wednesday following a smaller-than-expected increase in US inflation, which diminished market expectations for an interest rate hike from the Federal Reserve. The Personal Consumption Expenditures Price Index rose 0.3% last month, below the 0.4% increase forecast by economists polled by Reuters.
The softer inflation data led to a reduction in bets on further Fed rate increases. Traders are now pricing a 37% probability of a Fed rate hike in October, down from 70% a week ago, according to the CME's FedWatch tool. This repricing has pulled Treasury yields lower, narrowing the dollar's yield advantage.
The euro was flat at $1.133050 and was on track for a monthly loss against the dollar. Sterling strengthened 0.26% to $1.3265 but was also set for a monthly loss. The dollar index, measuring the greenback against a basket of currencies, was flat at 101.47, though still headed for a monthly gain. The dollar was also flat against the yen at 157.34.