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Dollar slips after July PPI, Fed September hold odds jump to 70%

July producer inflation data came in below expectations, with annual PPI slowing to 4.7% and Fed funds futures pricing near a 70% chance of a September rate hold.

Reported · Written up by our desk · Major Pairs

The US dollar slipped in early trading after July PPI data undershot expectations, reinforcing market views that the Federal Reserve may keep rates unchanged at its September meeting. Headline producer prices were flat month over month at 0.0% versus 0.2% expected, and annual PPI slowed from 5.5% to 4.7%, below the 4.9% consensus, Action Forex said.

The report added to a broader sequence of recent inflation signals, following an in-line CPI day earlier that showed core inflation edging down to 2.5% from 2.6%. With the latest price data suggesting the inflation impact from the first oil shock has largely faded, Fed funds futures moved to price close to a 70% probability of a September hold, up from about 45% a week earlier.

Action Forex noted that despite the repricing of Fed expectations, the dollar reaction was comparatively muted. The dollar was the second-weakest major currency on the day, behind the kiwi, while Swiss franc was strongest, with euro and yen also firmer.

In parallel, oil-linked moves appeared to lose momentum, with Brent’s roughly 12% six-session rally stalling around the $90 level as the geopolitical news flow that had supported risk premiums eased. Action Forex said WTI also eased as the market awaited fresh signals from upcoming US employment and inflation data ahead of the September 15 to 16 meeting.

Latest closeWTI crude $82.68 ▼0.6%|Brent $88.46 ▼0.5%

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