June CPI Crushes Forecasts, Dollar Slides on Cool Inflation Data
Headline CPI hit 3.5%, well under the 3.8% forecast. Core inflation also surprised lower, sparking a sharp dollar selloff.
June inflation data just dropped a bomb on dollar bulls. Headline CPI came in at 3.5% year-over-year — down hard from 4.2% the prior month and well below the 3.8% consensus. Monthly prices actually fell 0.4%, when the street was only pricing in a 0.1% decline. That's a big miss. The kind traders circle in red.
Core inflation was no slouch either. It eased to 2.6% annually from 2.9%, while the monthly core reading printed flat at 0.0% — the softest since January 2021. If you've been waiting for a clean disinflation signal, this is about as loud as it gets.
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The breadth of the cooldown is what makes this report hit different. Energy dragged lower as gas prices tanked, but shelter — the stickiest component — posted its smallest monthly gain since January 2021. Core services ex-shelter clocked their weakest reading since May 2020. Motor vehicle insurance, apparel, used cars, medical care, lodging — all softer. There's no cherry-picking here. This was widespread.
Fed Chair Warsh responded with hawkish prepared remarks, insisting the Fed has "no tolerance for persistent elevated inflation" and that "inflation is a choice." But markets aren't buying the tough talk right now. The USD sold off sharply, and RBC is already projecting both the Fed and Bank of Canada stay frozen through 2026. Goolsbee called the data "surprisingly benign." That's Fed-speak for good news.
Crude settled at $79.34, up $1.20 on the session, though oil gave back gains mid-session after Trump walked back a proposed 20% Hormuz toll. Canada got a Fitch AA+ affirmation with a stable outlook, adding a small tailwind to CAD. The macro picture shifted fast today — and the charts are pointing lower for USD. Continue reading at Forexlive.
