USD weakens across the board as CPI miss boosts Fed pause hopes

The US dollar index fell 0.5% to 104.20 after softer-than-expected inflation data reinforced expectations of a Federal Reserve policy pause. Core CPI rose 0.2% month-over-month versus 0.3% expected, while annual inflation eased to 3.4% from 3.5% previously. EUR/USD jumped 0.6% to 1.0780, while USD/JPY dropped 0.7% to 155.30 as risk sentiment deteriorated. The dollar's broad weakness extended to commodity currencies, with USD/CAD falling 0.4% to 1.3650. Market pricing now shows a 75% probability of no Fed action at the next meeting, up from 60% before the data. Technical analysis reveals the dollar index breaking below key support at 104.50, potentially opening the path to 103.80. Tomorrow's PPI data will be crucial in confirming the disinflationary trend, with any downside surprise likely to accelerate dollar selling pressure across major pairs.