USD Weakens Against Majors as Soft U.S. Inflation Data Clouds Fed Rate Hike Path

The U.S. dollar declined broadly against major currencies during the week ended July 31, driven by weaker-than-expected inflation data that has cast significant doubt on the Federal Reserve's ability to pursue further interest rate hikes in the near term. The softer CPI readings suggest that disinflationary trends are gaining traction, reducing the urgency for additional monetary tightening. Pairs such as EUR/USD and GBP/USD saw upside momentum as traders recalibrated their expectations for the Fed's policy trajectory, with rate futures now pricing in a lower probability of a September hike. The DXY dollar index came under sustained selling pressure throughout the week, retreating from recent highs. Key support for the dollar index sits near the 100.50 level, while EUR/USD resistance is being tested around the 1.1050 zone. For forex traders, the data reinforces a cautious stance on long-dollar positions. Upcoming employment and GDP figures will be critical in determining whether the Fed maintains its hawkish bias or signals a pause, making the next several data releases pivotal for directional conviction.