The US dollar is having a rough few weeks, and for once, it has two very different culprits to blame. Geopolitical friction in the Middle East and softer-than-expected inflation data landed at roughly the same time in mid-July 2026, and together they’ve been enough to push the greenback into a sustained slide.
The EUR/USD pair climbed during the July 9 to 15 window as the dollar retreated, a move driven by the combination of fragile truce prospects involving the US and Iran and June inflation figures that came in below expectations. When inflation cools, the Federal Reserve’s case for keeping rates elevated gets harder to make, and a less hawkish Fed means a weaker dollar.
What the inflation data actually says
June’s Consumer Price Index reading came in softer than markets had anticipated, undercutting the narrative that the Fed still has plenty of runway to keep tightening.
The wrinkle is energy. Middle East tensions have kept oil markets on edge, which means energy prices aren’t exactly cooperating with the broader disinflationary trend. The Fed now has to weigh cooling core inflation against an energy component that could reaccelerate if the geopolitical situation deteriorates further.
