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Dollar slips after dovish US PPI print cuts odds of September hike
The market now prices a 35% chance of a 25 basis point Fed rate hike in September, down from 40% earlier in the week.
The US dollar weakened against the broader market on Thursday after a dovish US PPI report reduced expectations for a Fed rate hike. Yahoo Finance reports the dollar index was down 0.1% on the day, and the probability of a September rate hike fell to 35% from 40% reported earlier in the week.
Interest rate dynamics also pressured the currency, with the 10-year Treasury note yield down 7 basis points, narrowing the US interest rate advantage that typically supports the dollar. Yahoo Finance also pointed to lower safe-haven demand, citing no overnight reports of new US or Iran military attacks in the Persian Gulf.
The inflation data showed July final-demand PPI unchanged month over month and up 4.7% year over year, versus market expectations for +0.2% m/m and +4.9% y/y. Yahoo Finance added that July core PPI rose 0.2% m/m, and 4.2% y/y, while the headline PPI eased from May’s 5.9% y/y peak, still remaining well above the Fed’s 2% target.
As dollar weakness lifted EUR/USD, Yahoo Finance said EUR/USD was up 0.1%, supported by a 7 basis point decline in US 10-year yields alongside expectations for a slower path of Fed tightening. The outlet also noted the market was pricing an 88% chance of a 25 basis point ECB rate hike at the next policy meeting.
Latest closeEUR/USD 1.157 ▲0.4%|Dollar index 99.64 ▼0.3%