Dollar Under Pressure as Soft Inflation Data Boosts Fed Cut Bets

The US dollar is facing downward pressure due to soft inflation data in the latest Producer Price Index (PPI) report. The PPI showed wholesale goods inflation was unchanged, while core PPI increased by 0.2%. This easing of inflation concerns has strengthened expectations for a less restrictive Federal Reserve policy outlook.

The dollar index, DXY, is currently trading above the critical 99.40 support area but needs to reclaim 100.36 to strengthen its recovery. The EUR/USD and GBP/USD currency pairs are also benefiting from softer inflation expectations, with potential breakout levels at 1.1620 and 1.1674 for EUR/USD.

The UK's second-quarter GDP showed a 0.4% quarterly rise, giving the Bank of England more room to focus on persistent inflation risks. The EUR/USD is testing major trendline resistance near 1.1569, while GBP/USD remains constructive above its rising trendline but needs to clear 1.3515 to confirm another bullish leg.