Dollar struggles as softer inflation dims Fed hike bets

The US dollar weakened after softer-than-expected US inflation data, with the dollar index falling 0.35 percent and pulling off highs not seen since July 2022. US headline CPI rose 3.5 percent year-on-year in June and fell 0.4 percent month-on-month, the first monthly decline since April 2020, halving market expectations of a July Fed rate hike to 16 percent. The softer data dragged two-year Treasury yields down 9 basis points from a 16-month high, though Fed Chair Kevin Warsh's hawkish comments and rising oil prices from Middle East tensions kept upside in the dollar limited.