Euro Gains on Soft US PPI Data, Rate Cut Expectations Rise

The euro rose against the US dollar following softer-than-expected US Producer Price Index (PPI) data, which reinforced market expectations that the Federal Reserve may cut interest rates later this year.

The EUR/USD pair traded up 0.2% to 1.0845 as of [time] ET, extending its recovery from last week's lows.

The US Bureau of Labor Statistics reported that the PPI rose 0.2% month-over-month in [month], below the 0.3% forecast, while the annual rate eased to 2.1% from 2.3%. The core PPI also came in softer than expected, rising 0.1% on the month.

This shift in expectations weighed on the US dollar, providing support for the euro, and market participants immediately priced in a higher probability of a rate cut at the Fed's September meeting, with futures now showing a 70% chance of a 25-basis-point cut, up from 65% before the data release.