At the time of writing, the CME Fedwatch Tool is indicating roughly 69% odds that we will see a 25 bps rate hike next month. The remaining 31% odds are siding with no change, and overall pricing hasn't changed drastically from before the US CPI data yesterday and earlier this week here.
While you would think that the lack of volatility in rates pricing would help to provide some backing to the dollar, that isn't the case when you look at curve depicted by Fed funds futures for the rest of the year:
The pricing continues to indicate a terminal rate of around 5.01% in June, which implies just roughly one more 25 bps rate hike to follow.
Thereafter, markets are anticipating rates to fall instead with the first full 25 bps rate cut priced in by September this year.
That's a massive nod to how markets are viewing the Fed outlook towards inflation at the moment, and the latest set of numbers yesterday is certainly helping to vindicate that - even if core inflation remains robust.
There are plenty of small details that you can go into such as looking into shelter prices and food inflation to gauge stickiness, but the simplest take now is that markets have reason to believe that inflation might continue to fall further. The key word there of course being 'might', but all it takes is a little bit of hope and that is enough.
It needs not much reminding that this is a market that has been so desperately hoping for a Fed pivot since Jackson Hole last year.