Dollar Slips as Cooling Inflation Eases Rate Hike Odds
US dollar index weakens as softer inflation eases Fed rate hike odds. The US Dollar Index, which measures the value of the USD against six major currencies, is trading at around 99.90 on Friday, down for the second consecutive day.
A softer-than-expected July PPI report has weighed on investor sentiment, with the core Producer Price Index (PPI) rising 0.2% in July, slightly below market consensus expectations of 0.3%. The US inflation rate remains a key factor influencing monetary policy decisions by the Federal Reserve.
The CME FedWatch Tool now shows a 34.8% probability of a US rate hike at the upcoming September meeting, down from 40% immediately following the PPI data release. Rabobank's Jane Foley notes that 'Fed rate hike speculation has recently suffered a setback on the back of recent US data releases,' which could lead to further slippage for the greenback.
However, Foley cautions that renewed energy market tensions and oil price spikes could restore support for the US currency. The outlook remains uncertain as markets await the upcoming July Retail Sales data release.