The U.S. dollar edged higher in early European hours Wednesday, bouncing from a 15-month low, while sterling slumped after weaker-than-expected U.K. inflation data.

At 02:55 ET (06:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 99.858, after falling Tuesday as low as 99.362, its lowest since April 2022.

Dollar boosted by U.S. consumer resilience
The dollar bounced overnight after the release of U.S. retail sales data for June. Although the headline figure rose less than expected in June, the May number was revised higher, and core sales showed more resilience, suggesting continued consumer resilience.

The release did not change expectations that the Federal Reserve would resume raising interest rates this month after keeping them unchanged in June.

U.K. inflation cools more than expected in June
GBP/USD slumped 0.7% to 1.2945 after British annual consumer price inflation fell to 7.9% in June, from May’s 8.7%, and below the expected 8.2%.

While the country’s CPI is moving further away from October’s 41-year high of 11.1%, it still remains far above the Bank of England’s 2% target, and the market has still priced in a further 100 basis points of hikes this year.

Euro falls back ahead of final June CPI reading
EUR/USD fell 0.3% to 1.1198, falling back 1.1276, the highest since Feb. 2022, that the pair hit during the previous session.

The final reading of the June eurozone CPI is also due later in the session and is expected to confirm that inflation rose 5.5% on the year last month, a drop from 6.1% the prior month.

The European Central Bank is widely expected to increase interest rates once more when it meets next week, but the single currency has weakened after a known ECB hawk opened the possibility of the central bank pausing its rate-hiking cycle debate after July.

“For July it is a necessity,” governing council member Klaas Knot, a known hawk, said in an interview on Tuesday, regarding interest rate increases, “for anything beyond July it would at most be a possibility, but by no means a certainty.”

Elsewhere, USD/JPY rose 0.3% to 139.62 ahead of the Bank of Japan’s policy meeting next week, after dropping to 137.25 on Friday, the lowest since May 17.

AUD/USD fell 0.5% to 0.6781, while USD/CNY traded 0.5% higher to 7.2171, with the yuan continuing to struggle after data showed that a Chinese economic recovery slowed substantially in the second quarter.