June CPI Surprises Lower at 3.5%, Dollar Slides Sharply
US June inflation came in well below forecasts, sending the dollar lower and fueling rate-cut speculation as core prices hit a four-year low.
The United States posted a sharply cooler-than-expected June inflation reading Monday, with headline CPI slowing to 3.5% year-over-year — below the 3.8% forecast and down from 4.2% the prior month. Monthly prices fell 0.4%, defying expectations for a 0.1% decline, while core inflation eased to 2.6% annually and flatlined month-over-month at 0.0%, its softest pace since January 2021. The report delivered the clearest evidence in months that the spring inflation rebound is fading.
The cooldown was broad-based and striking in its depth. Energy prices led the retreat as gasoline tumbled, but the relief extended well beyond the pump. Shelter costs posted their smallest monthly gain since January 2021, and core services excluding shelter recorded their weakest reading since May 2020. Motor vehicle insurance, apparel, used cars, medical care, and lodging all contributed to the downside surprise, signaling that disinflation is finally spreading through stubborn categories.
Read more Germany Wholesale Prices Fall in June but Stay Sharply Elevated →
The dollar sold off sharply in the immediate aftermath of the release, with currency charts signaling a decisive break that technical traders will be watching closely. Fed Chair Warsh, speaking in prepared remarks, declared the Fed has "no tolerance for persistent elevated inflation" even as Chicago Fed President Goolsbee called the June data "surprisingly benign." The juxtaposition of a hawkish tone with a dovish data print left markets recalibrating rate-cut timelines.
Elsewhere in Monday's session, crude oil settled at $79.34, up $1.20, though prices gave back gains mid-session after President Trump reversed course on a proposed 20% Hormuz toll — a reversal traders quickly labeled a "TACO" moment. Trump also signaled ambitions for major energy deals with Iraq. Meanwhile, RBC revised its Canadian and US growth forecasts higher but projected both the Federal Reserve and Bank of Canada will remain frozen through 2026, and Fitch affirmed Canada's sovereign credit rating at AA+ with a stable outlook.
Continue reading at Forexlive.
