Dollar Dives as Inflation Misses: EUR/USD Hits 1.17
Lamera Capital
2025-08-13
Dollar Under Pressure After Inflation Miss
The U.S. Dollar fell sharply on Thursday after the July inflation report came in softer than expected. Headline CPI missed forecasts, suggesting price pressures are cooling faster than markets anticipated, while core inflation edged slightly higher, keeping the Fed’s next move in focus.
The weaker headline number reinforced expectations for a softer U.S. interest rate outlook, with traders now leaning more towards a September rate cut. That shift helped EUR/USD push up to 1.17, its highest level in weeks.
Political Risk Adds Fuel to the Dollar’s Decline
Dollar sentiment took another hit after President Donald Trump threatened legal action against Federal Reserve Chair Jerome Powell, accusing the central bank of harming U.S. economic interests.
The rare public escalation raised fresh questions over Fed independence, a factor that could influence global investor confidence and U.S. rate policy expectations.
The rare public escalation raised fresh questions over Fed independence, a factor that could influence global investor confidence and U.S. rate policy expectations.
Markets Watching Trump–Putin Meeting for Ukraine Breakthrough
Attention now turns to Friday’s scheduled meeting between Trump and Russian President Vladimir Putin, with investors looking for signs of progress on a Ukraine ceasefire deal.
A successful outcome could boost European equities, lower energy prices, and further support the Euro, while failure could revive safe-haven Dollar demand.
A successful outcome could boost European equities, lower energy prices, and further support the Euro, while failure could revive safe-haven Dollar demand.
UK Jobs Data Surprises on the Upside
In the UK, the latest labour market report showed unemployment holding steady and jobs numbers slightly better than expected. While wage growth remains soft, the figures suggest the labour market could be stabilising, giving the Pound some breathing room after recent volatility.
GBP/USD edged higher following the release, though the main driver for Sterling in the coming sessions will likely be U.S. Dollar moves and broader risk sentiment.
FX Outlook
- EUR/USD: Holding firm above 1.17; further gains possible if geopolitical headlines and U.S. data keep pressuring the Dollar.
- GBP/USD: Modest upside bias after UK jobs beat; will take cues from U.S. inflation fallout and Ukraine news.
- DXY (Dollar Index): Slipped on softer CPI; political noise and rate cut bets keep bias tilted lower.
Bottom Line:
This week’s market story is a mix of softer U.S. inflation, political pressure on the Fed, and high-stakes geopolitics. The Euro is benefitting, Sterling has found support, and the Dollar’s direction from here will hinge on Friday’s Trump–Putin meeting and incoming U.S. data.