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The Consumer Price Index for June 2013 rose by 0.5%. It was expected to rise by 0.3%, after +0.1% last month (before revisions) and Core CPI was predicted to advance by 0.2% after 0.2% last month and this is the exact result. Year on year CPI also came out above expectations: 1.8% instead of 1.6% expected. The number is close to 2%, but the Fed watches Core CPI which stands at 1.6%, as expected. So, inflation is “subdued” as the Fed says, but it’s hard to paint a picture of deflation. At least not yet.

EUR/USD was on the rise, trading above 1.3120, and USD/JPY was pressured under 99.40 prior to the publication. The dollar is a bit higher after the release, with EUR/USD slipping below 1.31.

Yesterday, weak retail sales figures sent the US dollar tumbling down, ending the correction that it enjoyed after the blow from Bernanke.

Bernanke didn’t put emphasis on falling inflation, but this causes worries to FOMC member James Bullard who dissented from the recent Fed decision.

Opinion:  Falling inflation could push QE tapering towards late 2013 – thus weighing on the US dollar.

Next up: TIC Long Term Purchases, industrial output and the capacity utilization rate – all second tier indicators. Ben Bernanke’s testimony is the big event tomorrow.