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Euro holds modest gains versus dollar after softer US PPI

EUR/USD is near 1.1537 after July US PPI was unchanged, and Fed hike odds for September fell to 32% from 55% a week earlier.

Reported · Written up by our desk · Major Pairs

EUR/USD traded modestly higher on Thursday, hovering around 1.1537 after recovering from an intraday low of 1.1511, with a softer US Producer Price Index release failing to spark a larger move in the pair, FXStreet reports.

US Bureau of Labor Statistics data showed headline PPI was unchanged in July after falling 0.1% in June, while the annual rate eased to 4.7% from 5.5%. Core PPI rose 0.2% month over month, down from 0.4%, and its annual rate slowed to 4.2% from 4.7%, following broadly in line CPI data earlier this week.

The updated inflation backdrop has tempered expectations for Federal Reserve action, with CME FedWatch showing a 32% probability of a September rate hike, down from 55% a week earlier. The repricing also pulled the US Dollar Index below the 100 level after it touched a two week high, while Treasury yields fell across the curve, with the 2 year yield around 4.14%.

Even with the firmer inflation narrative, FXStreet noted traders were reluctant to add large positions due to ongoing upside inflation risks, including elevated energy prices and a lack of progress toward reopening the Strait of Hormuz. ECB rate expectations also remain in focus, with a Reuters poll expecting the ECB to raise its deposit rate by 25 basis points to 2.50% in September.

Latest closeEUR/USD 1.138 ▼0.6%|Dollar index 101.29 ▲0.2%

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