The Labor Department said Thursday that its producer price index, which measures inflation pressures before they reach the consumer, edged down 0.1 percent last month, reflecting a third month of declines in energy prices and a flat reading for food. Core inflation, which excludes volatile energy and food changes, was also up a slight 0.1 percent in July. Prescription drug prices rose 1.3% in July after increasing 1% in the prior month.
At the time of the report, the Euro was down 0.17% against the Dollar at $1.1752, with the Euro aiming for $1.18 levels should Eurozone inflation figures impress and U.S numbers disappoint through the day.
By way of backdrop, note that U.S. inflation has eased back in recent months after lifting tantalising close to the Fed's 2% inflation target earlier this year.
Despite market skepticism, PNC Financial chief economist Gus Faucher insisted that "the next rate hike would likely come at the end of 2017, allowing time for inflation to pick up". Economists had expected prices to rise by 0.2%.
For the 12 months ended June 30, that index increased just 1.4 percent after the annual rate had been near 2 percent earlier in the year.
"Instead, US inflation is like the most timid of creatures, and when it does rear its head, like it did earlier this year, it soon shuffles back into its den", said Michael Baxter, economics commentator at The Share Centre.
"US interest rates were hovering around zero for the best part of a decade while the Fed accumulated over $4tn worth of assets via QE, leading some to warn the only possible result would be runaway inflation".
The curve steepening suggested that the market has "slightly lowered the probability of a December rate hike", said TD Securities in a note. The Fed meets again in September.
For July, the CPI report showed that monthly wireless phone charges dropped 0.3 percent. Unemployment in July returned to a 16-year low of 4.3 percent. In testimony in July, Yellen noted "with inflation continuing to run below the Committee's 2 percent longer-run objective, the FOMC indicated in its June statement that it intends to carefully monitor actual and expected progress toward our symmetric inflation goal".
There was a strong increase in medical care goods for the month and a steady increase across the services sector. At 9:02AM ET (13:02GMT), the USA dollar index, which tracks the greenback against a basket of six major rivals, was down 0.29% at 93.03, pulling back off its intraday low of 92.92.
The dollar was 0.11 percent lower against the Swiss franc.