- US inflation has finally come down, on all measures.
- Stocks are up and the dollar is down in the immediate reaction.
- Fed officials will likely clarify the fight against inflation continues.
- The current moves could reverse sharply.
The fog around peak inflation has cleared – at least until the Federal Reserve announces its verdict. The US Consumer Price Index (CPI) report showed a considerable moderation in inflation; Core CPI rose by only 0.3% in July, significantly less than 0.5% expected. On a yearly basis, it stayed at 5.9% – cresting.
With headline inflation, it seems the peak is behind us. Prices remained unchanged in July, and yearly inflation decelerated from 9.1% to 8.5%. That is a relief for the Fed and for the White House.
For stocks, this report and the recent Nonfarm Payrolls report – a leap of 528,000 jobs in July – are golden. Lower price pressure means a lower path of interest rate rises, and higher employment means more sales for companies.
The dollar tumbled across the board amid expectations for the Federal Reserve to raise rates by only 0.50% in September and to begin cutting them at some point next year.
However, there is one thing that matters more than inflation data. No, it is not the NFP, but rather what the Fed says about inflation data. I think the central bank will continue its battle to crush inflation and refrain from declaring victory.
Why? First, shelter prices continue rising, and they take more time to fall. Secondly, this is only report – and prices could rill rise again. Third, the Fed still has one more CPI report until its September 21 meeting.
The current party in stock markets and the downfall in the dollar may suffer profit-taking once Fed officials speak up. They will undoubtedly acknowledge the improvement – they cannot deny reality – but without a party from Fed officials, the party in stock market will suffer a pause. For the dollar, it should trigger a short squeeze of the current massive sell-off.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks

EUR/USD trades quietly below 1.1700 as investors await fresh cues on US-EU trade talks
The EUR/USD pair trades calmly around 1.1670 during the Asian trading session on Tuesday. The major currency pair oscillates in a limited range, with investors awaiting fresh development on trade negotiations between the United States and the European Union.

GBP/USD: Struggles near multi-week low, around 1.3430 ahead of US CPI
The GBP/USD pair consolidates near the 1.3430-1.3435 region, just above a three-week low touched during the Asian session on Tuesday as traders keenly await the release of the US consumer inflation figure. Meanwhile, the fundamental backdrop seems tilted in favor of bears and suggests that the path of least resistance for spot prices is to the downside.

Gold price moves closer to three-week peak amid modest USD downtick
Gold price regains positive traction amid a modest USD pullback from a multi-week high. Persistent trade-related uncertainties also lend support to the safe-haven precious metal. Reduced Fed rate cut bets might cap the commodity ahead of the critical US CPI report.

BONK rallies as OI hits yearly high, LetsBonk.fun tops Solana launchpad revenue
Bonk continues its bullish momentum, extending gains, trading around $0.000027 on Tuesday after rallying almost 20% the previous week. On-chain and derivatives data paint a bullish picture as BONK’s launchpad has collected the highest weekly revenue, and Open Interest reaches its yearly high.

Five fundamentals for the week: Investors eye tariff circus and US inflation data Premium
Which country will be the next to receive a letter from America? US President Donald Trump has been extending his tariff threats through the weekend. Has the US economy felt the consequences of levies already imposed? These are the topics for another hot summer month.

Best Brokers for EUR/USD Trading
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.