Dollar Nears Three-Week High Ahead of CPI Data; Bitcoin Stays Above $120,000

Dollar Approaches Three-Week Peak Ahead of Key Inflation Data

The U.S. dollar edged close to a three-week high on Tuesday as investors awaited critical inflation figures that could influence the Federal Reserve’s monetary policy trajectory. The greenback also climbed to a 15-week peak against the Japanese yen following the release of June’s Consumer Price Index (CPI), which indicated a moderate rise in consumer prices. Although the data showed an uptick, it was insufficient to significantly alter expectations regarding the timing of the Fed’s potential interest rate cuts.

The CPI rose by 0.3% in June, marking the largest monthly increase since January and following a 0.1% gain in May. On an annual basis, inflation increased to 2.7% from 2.4% the previous month, slightly surpassing economists’ forecasts. Core inflation, which excludes volatile food and energy prices, advanced by 0.2% in June and 2.9% year-over-year, edging up after three consecutive months at 2.8%.

Despite this inflationary rise, market participants largely anticipate the Federal Reserve’s first rate reduction to occur in September, with futures pricing in approximately 48 basis points of cuts by the end of the year. James Knightley, chief international economist at ING, noted that while the slightly softer-than-expected June core inflation reading keeps the possibility of a September rate cut alive, there remains a risk of less favorable data in the coming months. He emphasized the need for clear evidence of weakening employment figures to prompt Fed action before December.

Trade Tensions and Currency Market Movements

Concerns over President Donald Trump’s tariff policies continue to temper the Fed’s outlook on inflation. Last week, the administration announced plans to impose higher tariffs starting August 1 on imports from several countries, including Mexico, Japan, Canada, Brazil, and the European Union. However, market reaction has been subdued as investors await clarity on whether these measures will escalate into broader trade conflicts or pave the way for new agreements. Steve Englander, head of global G10 FX research at Standard Chartered Bank, remarked that the market is largely disregarding the tariffs until it becomes evident if a major escalation akin to the April China tariffs will occur or if these are incremental steps toward a deal.

In currency markets, the euro declined 0.27% to $1.1631, reaching its lowest level since June 25, while the British pound slipped 0.21% to $1.3399, its weakest since June 23. The dollar strengthened notably against the yen, gaining 0.66% to 148.68, the highest level since early April.

Bitcoin Surpasses $120,000 Amid Institutional Interest

In the cryptocurrency arena, Bitcoin surged to a new all-time high above $120,000, propelled by increasing institutional investment and a favorable macroeconomic environment. This rally has elicited mixed responses from analysts, with some forecasting continued gains while others caution about potential volatility in the near term. The surge in Bitcoin has also heightened attention on rival cryptocurrencies, which are experiencing increased trading volumes as digital assets gain broader acceptance in global markets.