The US dollar tumbled to multi-month lows on Thursday following a slowdown in US core inflation, which was its slowest pace in three years.

US Dollar Hits Multi-Month Lows, Raising Rate Cuts Expectations

According to Reuters, this development heightened expectations for rate cuts and drew bets that the US currency may have reached its peak for now.

The Japanese yen in Asia continued its upward trend, hitting its highest point in two weeks at 153.6 per dollar as the yield gap between US and Japanese bonds decreased.

The Australian dollar touched a four-month peak at $0.6714 before pausing due to an unforeseen increase in Australian unemployment. It was last recorded at $0.6687. 

Similarly, the euro advanced to a two-month high at $1.0895, the New Zealand dollar reached $0.6140, and the British pound climbed to $1.27, its highest in a month.

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US Inflation

According to Wednesday's data, April's figures showed core US inflation slowed to a yearly rate of 3.6%, aligning with market expectations.

Despite being above the Federal Reserve's 2% target, it eased from the previous month's 3.8%, which led investors to anticipate rate cuts as early as September or even earlier. US retail sales figures, which remained flat last month rather than the expected 0.4% increase, further indicated a slowing economy.

According to Reuters, this data spurred a rally in Treasuries, and with Japanese bonds being sold off, the gap between US and Japanese 10-year yields narrowed by 20 basis points this week.

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