Dollar Slides as Softer PPI Data Dampens Rate Hike Expectations

The US Dollar slipped against the Euro on Thursday after softer-than-expected Producer Price Index (PPI) data from the US Bureau of Labor Statistics. The headline PPI was unchanged in July, a decline from the previous month's drop of 0.1%. Core PPI rose by 0.2% month-over-month, but its annual rate slowed to 4.2% from 4.7%. This comes after Wednesday's inflation data showed both headline and core inflation easing on an annual basis.

The weaker-than-expected July Nonfarm Payrolls (NFP) report, combined with the latest PPI figures, has dampened expectations for a Federal Reserve interest-rate hike. According to the CME FedWatch Tool, markets now assign a 32% probability of a September rate hike, down from 55% a week ago.

Cleveland Fed President Beth Hammack commented on the latest inflation reports, stating that they were 'welcome news', but she was not confident that the progress would continue. She emphasized that the labour market is stable, while inflation caused by supply shocks has proved more persistent.