Markets price in lower chances of a September Fed rate increase after July producer inflation fell below expectations.
The US Dollar Index dipped below 100.00 on Friday as traders scaled back bets on a Federal Reserve rate hike. The shift follows July’s Producer Price Index (PPI) data, which showed annual inflation easing to 4.7% from 5.5% in June, missing forecasts of 4.9%.
The CME FedWatch Tool now shows a 33% probability of a 25 basis points hike in September, down from nearly 50% a week ago. Investors are also eyeing upcoming US Retail Sales and Consumer Sentiment data, along with second-quarter GDP figures from Europe, for further policy cues.
Fed officials continue to signal hawkishness, with Cleveland Fed President Beth Hammack emphasizing the importance of August inflation data ahead of the next meeting. The USD remains under pressure amid geopolitical tensions in the Middle East.