(fxcue news) - The U.S. dollar shed some ground against a few of its major counterparts on Wednesday as expectations of a rate from the Federal Reserve rose after data showed a moderation in the nation's consumer price inflation in July. The Labor Department said its consumer price index rose by 0.2% in July after edging down by 0.1% in June. The modest increase by consumer prices matched expectations. Core consumer prices, which exclude food and energy prices, also crept up by 0.2% in July after inching up by 0.1% in June. The uptick by core consumer prices was also in line with economist estimates. Meanwhile, the report said the annual rate of consumer price growth slowed slightly to 2.9% in July from 3% in June. Economists had expected the pace of growth to remain unchanged. The annual rate of core consumer price growth also slipped to 3.2% in July from 3.3% in June, in line with expectations. While the slowdowns by the annual rates of price growth suggest the Federal Reserve is likely to lower interest rates next month, traders may feel the chances of a rate cut are already priced into the markets after yesterday's rally. CME Group's FedWatch Tool is currently indicating a 56.5% chance the Fed will lower rates by a quarter point and a 43.5% chance of a half point rate cut. The dollar index dropped to 102.27 around mid morning, but recovered gradually to 102.62, netting a marginal gain. Against the Euro, the dollar weakened to 1.1012 from 1.0995. The dollar strengthened to 1.2828 against Pound Sterling. Against the Japanese currency, the dollar firmed to 147.37 yen. The dollar firmed to 0.6598 against the Aussie, gaining more than 0.5%. The Swiss franc edged down marginally to 0.8651 against the greenback. Against the Loonie, the dollar firmed to C$ 1.3716.