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The US dollar initially weakened, and Treasuries rallied after US inflation readings showed softness across the board. With no headline inflation in place, the Fed’s decision to cut rates should be an easy one at the July meeting. Odds for a rate cut at the July 31st meeting rose to 75.9%, while the next week’s meeting remained around 20%. The Fed’s transitory effects could still be lingering and with core figures still hovering at the Fed’s target, the case for a June cut should be off the table. The core consumer price index which removes energy and food costs climbed 2% from a year earlier missing forecasts, but still posting its fourth straight monthly increase.
The dollar dropped 15 pips to the euro following the data but has settled near unchanged levels at 1.1318.
Fed funds futures are now indicating a rate of 1.725% at the end of the year. The yield on 10-year Treasuries slumped 2.8 basis points to 2.115%, while the dollar fell to the weakest levels in almost two months.
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With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya
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