USD Plunges Across Major Pairs as June CPI Misses Expectations Sharply

The US dollar is falling sharply against all major currencies following a significantly softer-than-expected June CPI report. Headline CPI dropped 0.4% month-over-month, well below the -0.1% consensus, while the year-over-year reading came in at 3.5% versus 3.8% expected, down from the prior 4.2%. Core CPI was flat at 0.0% m/m against expectations of +0.2%, with the year-over-year core reading at 2.6% versus 2.8% forecast. The disinflation was broad-based: core goods prices fell for a second straight month, core services excluding housing declined 0.2%, and shelter costs rose a modest 0.12%. The data has dramatically repriced Fed rate expectations, with Fed funds futures pricing in significantly fewer hikes at the July 29 meeting and through year-end. Traders are also digesting testimony from Fed Governor Warsh, adding another layer of uncertainty. Technical charts across major dollar pairs are signaling further downside for the greenback, with key support levels being tested. The combination of cooling inflation and shifting rate expectations suggests continued dollar weakness in the near term.