Softer US PPI data reduces expectations for a September Fed rate hike, lifting the euro against the dollar ahead of EU growth figures.
The euro held above 1.1500 USD as US inflation data weakened expectations for a Federal Reserve rate hike in September. The Producer Price Index (PPI) cooled to 4.7% headline and 4.2% core, down from June’s figures, signaling disinflation progress.
Traders now see a 67% chance of a December rate hike, down from 70% a day earlier, according to Prime Terminal. US jobless claims rose to 209K, slightly above estimates but near the 4-week average of 199K. Meanwhile, Spanish inflation hit 3.9%, its highest since May 2025, fueling bets of a 25-basis-point ECB rate increase in September.
Markets priced in an 87% probability of an ECB hike, contrasting with fading Fed tightening expectations and supporting EUR/USD stability.