US Dollar Weakens Slightly Ahead of June CPI Release Amid Tariff Uncertainty

US Dollar Weakens Slightly Ahead of June CPI Release Amid Tariff Uncertainty

The US Dollar (USD) is trading slightly weaker on Tuesday as investors turn cautious ahead of the highly anticipated Consumer Price Index (CPI) data for June. Market sentiment remains subdued, hovering near the DXY 98.00 level, as traders await clues on the inflation outlook and future Federal Reserve policy direction.

Market Eyes Inflation Data for Clarity

The US Bureau of Labor Statistics is set to publish the June CPI report at 12:30 GMT. Expectations suggest headline CPI will rise 0.3% MoM, up from 0.1% in May, marking the steepest increase in five months. On a year-over-year basis, CPI is forecast to rise to 2.7%, up from 2.4%.

The core CPI, excluding volatile food and energy prices, is projected to increase to 3.0% YoY, from May's 2.8%. Much of this rise is attributed to recent tariff-driven cost pressures, which are gradually being passed on to consumers.

Trump’s Tariff Threats Stir Market Anxiety

President Donald Trump’s renewed threats of "very severe" tariffs on Russia and additional secondary tariffs on countries importing Russian oil have fueled geopolitical tensions, creating a risk-averse mood in the markets. Traders are reluctant to take aggressive positions ahead of clarity on inflation and trade policy.

Fed Policy Outlook Hangs in the Balance

Federal Reserve Chair Jerome Powell has indicated that uncertainty stemming from tariffs is a major factor holding back rate cuts. Powell recently stated, "We went on hold when we saw the size of the tariffs," signaling that the Fed needs more clarity on long-term inflation impacts before adjusting interest rates.

While some policymakers view tariff-driven inflation as transitory, others warn it may complicate the Fed’s ability to ease policy in the near term.

Also Read on Tredu.com:

• Live Coverage: US CPI Data and Market Reaction
• How Tariffs Could Shape the Fed’s Next Move
• Trump’s Trade War Reignites Safe-Haven Demand