Soft US inflation data and reduced Fed tightening expectations weigh on the USD, offset partly by geopolitical risks and energy inflation concerns.
The US Dollar Index (DXY) remains near 100.50, a nearly four-week low, as traders scale back Federal Reserve rate hike expectations. Wednesday’s data showed US Producer Price Index (PPI) fell 0.3% in June, following a softer Consumer Price Index (CPI) report earlier in the week.
The decline in inflation metrics eases concerns about prolonged high interest rates, pressuring the USD. However, escalating US-Iran tensions and energy-driven inflation fears provide some support, limiting further losses.
Geopolitical risks intensified after US airstrikes targeted Iranian infrastructure, prompting retaliatory attacks. The deepening conflict adds uncertainty to market sentiment, though its direct impact on the dollar remains muted for now.