The dollar fell in U.S. trading hours on Thursday after producer prices came in flat for July, missing forecasts and adding to bets that the Federal Reserve will hold rates steady in September. The Dollar Spot Index slipped under 100, while a jump in weekly jobless claims added to the case for a pause.
The U.S. dollar dropped on Thursday after data showed producer prices held flat in July, reinforcing signs that inflation pressure is easing. Economists had expected a 0.2% rise. The reading builds on Wednesday's benign consumer price report, which had already prompted traders to pare bets on a September Fed interest rate hike.
Producer prices cool further
The producer price index for final demand was flat last month after a revised 0.1% decline in June, the Labor Department said. On an annual basis, producer prices rose 4.7%, down from 5.5% in June and below expectations for a 4.9% increase.
As a result, markets have cut the probability of a September hike to about 40% from 54% after the CPI data, and the softer PPI reading added to that shift.
Dollar index slips under 100
At 9:44 a.m. EST, the Dollar Spot Index edged lower by 0.11% and slipped under 100 to 99.90. The euro edged higher and hovered near $1.1538, while the British pound traded steady around $1.3500. The Japanese yen consolidated around 159.23 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.
Separately, initial jobless claims rose 9,000 to a seasonally adjusted 209,000 for the week ended August 8, above the 202,000 economists had forecast.
Hawks lack a trigger
Sam Hill, head of market insights at Lloyd's Bank, said: "It is hard to see a September hike on that basis." He added that hawkish concerns will keep developing but currently lack a clear trigger.
Yet currency desks are finding it difficult to sell the dollar aggressively because of lingering stagflation risks 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 satisfy 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.
With central bank policy trajectories largely priced in for September, currency traders are taking a breather until fresh catalysts land.
Source: Investing.com
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