EUR/USD Edges Higher as Soft PPI Data Damps Fed Rate Hike Expectations
The EUR/USD pair edged higher against the US Dollar on Thursday after softer-than-expected US Producer Price Index (PPI) data. The headline PPI was unchanged in July, while the annual rate eased to 4.7% from 5.5%. Core PPI rose by 0.2% MoM, down from 0.4%, and its annual rate slowed to 4.2% from 4.7%.
The report follows Wednesday's CPI data, which showed both headline and core inflation easing on an annual basis. Together with the weaker-than-expected July Nonfarm Payrolls (NFP) report, these figures have dampened expectations for a Federal Reserve (Fed) 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. This repricing weighs on the US Dollar Index (DXY), which retreats below the 100 psychological mark after touching a two-week high earlier in the day.