The U.S. dollar held steady on Thursday after July inflation data landed exactly in line with economist forecasts, giving traders little impetus to reposition ahead of the Federal Reserve's next policy meeting.

CPI Figures Align With Projections

The Consumer Price Index rose 0.1% in July on a month-over-month basis, while year-over-year inflation edged down to 3.4% from June's 3.5% reading. Core CPI, which excludes food and energy costs, advanced 0.2% monthly and 2.5% annually. Every metric matched consensus estimates. Both headline and core readings remain above the Federal Reserve's 2% inflation target, meaning the data, while encouraging, does not by itself indicate that the central bank's price-stability goal has been achieved.

BREAKING: July CPI inflation falls to 3.4%, in-line with expectations of 3.4%

Core CPI inflation falls to 2.5%, also in-line with expectations of 2.5%.

Month-over-month CPI inflation rose +0.1%, up from -0.4% in June.

US stock market futures are rising on the news.

— The Kobeissi Letter (@KobeissiLetter) August 12, 2026

The Dollar Index, which measures the greenback against a basket of six major trading-partner currencies, remained essentially flat at approximately 100.03 during Thursday's morning session, following a 0.2% advance the previous day, and continued trading within a narrow range.

Fed Rate Hike Expectations Ease but Persist

Market-implied probability of a Federal Reserve rate increase at the September policy meeting declined to roughly 40%, down from 54% before the inflation report's release. Analysts at MUFG indicated the figures should allow the central bank to hold rates steady temporarily, though they are unlikely to trigger any major policy recalibration at this stage.

Deutsche Bank observed that September rate-hike pricing fell to levels not seen since the June Federal Reserve meeting. Nevertheless, the bank's economics team maintains its forecast for a September increase, arguing that while the CPI data diminished immediate concerns, it did not eliminate the likelihood of further tightening. Deutsche Bank further cautioned that the figures failed to address persistent challenges surrounding fiscal deficits, supply constraints, and term premium considerations.

Attention now turns to U.S. producer inflation data and weekly unemployment claims, both scheduled for release later Thursday. Producer prices are closely watched because changes at the wholesale level often feed through to consumer prices in subsequent months. Retail spending figures are also in focus as market participants seek additional clues about the Fed's policy trajectory.

Yen Under Pressure, Oil Holds Near $89

The Japanese yen continued to face downward pressure. USD/JPY traded around 159.40, approaching a two-week peak. Japanese and U.S. authorities confirmed joint yen-strengthening intervention earlier this month after the currency sank to four-decade lows.

Geopolitical tensions added to market uncertainty. Iranian officials stated that no progress had been made in efforts to revive an interim agreement with Washington. The United States criticized Tehran for failing to fulfill commitments regarding the reopening of a critical maritime passage, while Iran maintains that Washington has not met its own obligations.

Brent crude held near $89 per barrel. Analysts at TD Securities indicated they anticipate further oil price appreciation, which could lift headline inflation metrics later this year and sustain the possibility of a December rate adjustment.

Gold experienced a minor retreat, trading near $4,370 during European hours after holding above $4,400 on Wednesday. The Australian dollar weakened 0.2% against the U.S. dollar. In the United Kingdom, second-quarter GDP expanded 1.2% year-over-year, marginally exceeding forecasts, although industrial and manufacturing production declined in July.