The Dollar Index (DXY) decreased by 0.09 points (0.09%) today following a dovish US PPI report, which lowered the odds of a Federal Reserve rate hike in September to 35% from 40% earlier in the week. The 10-year Treasury yield fell by 7 basis points, further impacting the dollar’s interest rate differentials.
The July final-demand PPI remained unchanged month-over-month and increased by 4.7% year-over-year, falling short of market expectations of 0.2% m/m and 4.9% y/y. Concurrently, the core PPI rose by 0.2% m/m, lower than the expected 0.3%, while the year-on-year figure of 4.2% slightly exceeded forecasts of 4.1%. These figures are indicative of a broader trend as the markets adjust expectations for future Fed rate changes.
On the currency front, the EUR/USD rose by 0.14% due to dollar weakness, influenced by the 10-year T-note yield decrease. The markets are currently pricing an 88% probability of a 25 basis point rate hike from the ECB at their meeting on September 10, and a 76% chance for a BOJ rate hike at their meeting on September 18.
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