FX.co ★ Dollar Holds Decline on Soft PPI

The dollar index hovered around 100.5 on Thursday after sharp declines over the previous two sessions, as easing inflation pressures dampened expectations of a near-term Federal Reserve interest rate hike. Data released on Wednesday showed that US producer prices unexpectedly fell in June for the first time in nearly a year, largely reflecting lower energy costs, following Tuesday’s softer-than-expected consumer inflation report. In response, markets pared back expectations for a Fed rate increase in September, with the implied probability slipping to about 44% from 50% a day earlier. At the same time, investors kept a close eye on escalating tensions in the Middle East after the US carried out additional strikes on Iranian targets. The renewed conflict sent oil prices sharply higher this week, stoking fresh concerns about inflation and the interest rate outlook. Even so, President Donald Trump said on Wednesday that Tehran had signaled a willingness to resume negotiations.