The dollar index fell 0.32% on Tuesday after US June consumer prices rose less than expected, a dovish factor for Fed policy. The annual headline CPI eased to 3.5% from 4.2% in May, below the 3.8% forecast, while core CPI slowed to 2.6% from 2.9%, better than the 2.8% estimate. Swaps markets now price only a 17% chance of a 25-basis-point rate hike at the July 28-29 FOMC meeting, down from 43% on Monday. The euro rallied to a one-week high, gaining 0.38%, while the yen edged up 0.15% amid lower Treasury yields and comments from Japan's finance minister about adding government bonds to a tax-free investment program. Gold surged 1.60% and silver jumped 1.95% as the benign inflation data pushed the dollar and yields lower, though hawkish remarks from Fed Chair Warsh and Chicago Fed President Goolsbee capped gains.
Benign US CPI data reduces rate hike expectations, weakening dollar and lowering yields, which supports gold prices.
Benign US CPI data reduces rate hike expectations, weakening dollar and lowering yields, which supports silver prices.