DXY: The Dollar Index Shakes After Losing for Four Days. Will data on inflation bring it down even more?

Inflation is expected to be 3.1% in June, which is a lot less than what it was in May. You can expect volatility.

The US dollar index DXY has lost a lot over the past four days, and today is when inflation data is due. Analysts on Wall Street think that the year-over-year change in the consumer price index for June will be a good 3.1%. The US dollar is already being left behind by traders. Why?

Most of the time, inflation and the local currency go together. When inflation goes up, the value of a currency tends to go down because it costs more. And vice versa. As inflation falls, the currency loses its advantage, and buyers start looking elsewhere for above-average returns.

In this way, the dollar measure has been going down against other currencies. The dollar has lost about 2% of its value against a group of currencies. In just four days, it has dropped from 103.60 to 101.30. Before Wednesday's report on inflation, the dollar stayed mostly still.