Dollar stalls after benign US inflation curbs Fed rate hike bets
On Thursday, the U.S. dollar exhibited mixed performance after a report revealed that producer prices remained unchanged in July. This led traders to reduce their expectations for a September Federal Reserve interest rate increase. The unchanged Producer Price Index (PPI) for final demand followed a revised 0.1 percent decline in June, which was lower than the 0.2 percent increase economists had anticipated.
Noel Dixon, a senior macro strategist at State Street, noted that the PPI report's components could indicate a positive outlook for the Personal Consumption Expenditures report due later in the month. Fed funds futures now indicate a 35 percent probability of a September rate hike, down from 40 percent on Wednesday and 55 percent a week earlier.
The dollar index, which gauges the greenback's value against a basket of currencies, increased slightly to 99.96 following the PPI report. Meanwhile, the euro gained 0.03 percent to $1.1528. Traders are uncertain whether the Federal Reserve will need to raise rates, as inflation remains higher than the 2 percent target and oil prices surge due to Iran-related disruptions in the Strait of Hormuz.
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