The US dollar (USD) traded slightly weaker on Tuesday (July 15th) as investors prepared for the highly anticipated release of the US Consumer Price Index (CPI). With market participants repositioning ahead of key inflation data, the greenback struggled to maintain its gains from the previous day.

The US Dollar Index (DXY) traded slightly lower, holding near the psychological 98.00 level during the European session. Although the index remains supported, it faces key technical resistance at current levels, preventing traders from placing aggressive bets.

The broader market mood remains cautious amid ongoing tariff threats from US President Donald Trump, while investors await US CPI data for fresh direction.

The US CPI report for June is scheduled for release at 12:30 GMT. The importance of this release is heightened by current economic conditions, particularly concerns surrounding the impact of tariffs on consumer prices. Economists expect headline inflation to rise to 0.3% month-on-month, which would be the largest monthly increase in five months, following a smaller 0.1% increase in May. The annual inflation rate is expected to rise to 2.7% from 2.4% in May.

Core CPI, which excludes food and energy prices, is projected to rise to 3.0% year-on-year, up from a 2.8% increase in the previous month. This expected increase is partly due to rising costs resulting from recent US tariffs, which are being passed on to consumers through higher prices.

While some of the impact of tariffs may already be felt, a more substantial effect is expected to occur starting in July. A higher-than-expected CPI figure could dampen hopes for a near-term interest rate cut, while a lower figure could revive expectations of a dovish Fed policy shift.

Fed Chairman Jerome Powell has clearly stated that uncertainty over the impact of tariffs is one of the main reasons why the central bank is delaying interest rate cuts. Powell emphasized that the Fed "delayed cutting rates when it saw the magnitude of tariffs," and now intends to assess how deeply tariffs will impact consumer prices and growth before easing monetary policy.

While some Fed officials believe tariffs will only cause temporary price increases, many worry that the inflationary impact could persist longer, making it more difficult for the Fed to lower interest rates in the near term. (alg)

Source: FXstreet