The dollar, euro, pound and yen traded in tight ranges on Thursday after an in-line U.S. inflation report cooled September rate-hike bets. Traders are now waiting on producer prices and retail sales data for the next catalyst, while an energy-driven stagflation risk keeps them from pushing the dollar lower.
The U.S. dollar, euro, British pound and Japanese yen traded in tightly bounded channels on Thursday, as foreign exchange desks settled into a holding pattern after an in-line U.S. inflation report. The Dollar Spot Index held virtually flat at 100.03, following a 0.2% gain in the prior session.
Elsewhere, the euro hovered near $1.1520. The British pound traded steady around $1.3480. The Japanese yen consolidated around 159.40 per dollar, lingering near two-week lows as traders stayed wary of further intervention by Tokyo and Washington following joint yen-buying operations earlier this month.
Cooling inflation dials back Fed bets
The quiet across currency hubs reflects a market caught in a tug-of-war. On one side, Wednesday's U.S. Consumer Price Index report showed headline inflation slowing to 3.4% year-on-year, with core CPI anchoring at 2.5%, validating last week's dovish nonfarm payrolls report.
As a result, cooling labor demand combined with contained underlying inflation pulled market-implied odds of a September Fed rate increase down to roughly 40%, from 67% a week earlier. According to Investing.com, "It is hard to see a September hike on that basis," said Sam Hill, head of market insights at Lloyd's Bank. He added that hawkish concerns will keep developing, but a trigger to renew them is currently lacking.
Energy shock keeps a floor under the dollar
On the other side, desks are finding it difficult to sell the dollar aggressively because of lingering stagflation risk tied to an ongoing energy shock. Efforts to revive a transit agreement in the Persian Gulf hit another political impasse, with Washington accusing Tehran of failing to meet maritime safety conditions and Iran insisting on the release of frozen assets.
The deadlock has kept Brent crude elevated near $89 a barrel, raising fears of persistent cost-push inflation across major net-importing economies in Europe and Asia.
Traders now wait on PPI and retail sales
With central bank policy trajectories largely priced in for September, currency traders are taking a breather. Market focus now shifts to upcoming Producer Price Index figures and U.S. retail sales data later in the week, which will show whether consumer spending is holding up alongside cooling inflation. Until those numbers land, major currency pairs are expected to stay locked in tight, news-driven ranges.
Source: Investing.com
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