Dollar Index Softens Below 100 as Softer PPI Data Reduces Hike Bets

The US Dollar Index (DXY) has softened below 100.00 as softer-than-expected PPI data reinforced bets that the Federal Reserve will refrain from hiking interest rates next month.

Data released by the Bureau of Labor Statistics on Thursday showed that the US Producer Price Index (PPI) was unchanged in July, following a revised 0.1% decline in June. This figure came in below the market consensus of 0.2%.

The core PPI, which excludes food and energy, increased 0.2% MoM in July, softer than a 0.3% gain expected. On an annual basis, the headline PPI climbed 4.7% YoY in July, while the core PPI rose 4.2% YoY during the same period.

This report has bolstered market expectations that the US Federal Reserve (Fed) could keep interest rates unchanged next month. Markets are now pricing a 34.8% chance of a US rate hike at the September meeting, down from 40% immediately after the PPI data, according to the CME FedWatch Tool.