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Dollar weakens as softer PPI data boosts September Fed cut bets
July producer prices were flat for wholesale goods, and core PPI rose 0.2%, adding to expectations the Fed starts easing in September.
Yahoo Finance reports the US dollar is under pressure after updated inflation signals shifted expectations toward more easing by the Federal Reserve. The July Producer Price Index showed wholesale goods inflation was unchanged from the prior month, and core PPI increased by 0.2% after earlier CPI data pointed to a slower-than-expected rise in consumer inflation.
The outlet adds that the softer inflation picture is also feeding into market expectations for the Fed to begin cutting rates in September, even as Fed officials continue to prioritize the labor market. Recent July hiring data pointed to slower hiring, raising the need to balance inflation concerns against an economy seen as likely to be slowing.
For EUR/USD and GBP/USD, Yahoo Finance says the euro is getting support from reduced expectations for US rate moves, while the European Central Bank remains cautious and keeps policy unchanged as it weighs the effects of disruptions to Middle East energy supply, inflation, and consumer demand. The outlet also notes sterling faces pressure tied to UK second-quarter GDP rising 0.4% quarter over quarter, with the Bank of England still balancing inflation risks against wage pressures and energy price effects.
The piece concludes that currency direction continues to hinge on interest-rate differentials and expectations for changes, with easing US inflation lowering expectations of further rate hikes by the FOMC. It frames the euro and pound outlook as dependent on how their respective rate paths compare with the Fed’s trajectory.
Latest closeEUR/USD 1.157 ▲0.4%|GBP/USD 1.354 ▲0.3%