US dollar mixed, markets eye Fed cuts after soft inflation data
FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo
NEW YORK/LONDON : The U.S. dollar was narrowly mixed on Wednesday, with no definitive direction, after data showed producer prices unexpectedly fell in August, cementing expectations that the Federal Reserve will resume cutting interest rates later this month.
The dollar was slightly down against the yen at 147.31 following the data, while the euro was flat at $1.1706. Before the data, the U.S. currency was trading moderately up on the day against both currencies.
A Labor Department report showed the Producer Price Index for final demand fell 0.1 per cent on a monthly basis, after a downwardly revised 0.7 per cent jump in July. Economists polled by Reuters had forecast the PPI would rise 0.3 per cent after a previously reported 0.9 per cent surge in July.
But the PPI advanced 2.6 per cent on an annual basis in August, compared with a 3.3 per cent gain expected by economists polled by Reuters.
"Odds on a half-point move have risen, but remain extremely low. The economy has slowed, but isn't showing signs of crashing, and may even accelerate in the months ahead," said Karl Schamotta, chief market strategist, at Corpay in Toronto.
"Inflation pressures seem subdued, but risks are tilted to the upside. For most market participants, a quarter-point move remains the most plausible base case."
Following the data, fed funds futures are pricing in a 90 per cent chance of a standard 25-basis-point cut this month and a 10 per cent chance of 50-bp rate decline, according to the CME's FedWatch. That was at 93 per cent and 7 per cent, respectively, late on Tuesday.
With PPI out of the way, investors are now focused on the consumer prices index for August due out on Thursday. A Reuters poll showed headline CPI of 0.3 per cent last month and a year-on-year rise of 2.9 per cent.
Meanwhile, there was no shortage of geopolitical tension overnight that spilled over to Wednesday.
Israel's attempted killing of Hamas leaders with an airstrike on Qatar on Tuesday, along with Poland shooting down drones that entered its airspace during a Russian attack in western Ukraine on Wednesday, were keeping investors nervous.
The euro rose 0.3 per cent against the Polish zloty to 4.259 zloty, and set for its biggest one-day rise since August 11.
The dollar index, which measures the U.S. currency against six others, was down slightly at 97.74. It has fallen by 10 per cent this year, dented by chaotic U.S. trade and fiscal policy and by growing concern about the independence of the central bank.
Markets, meanwhile, showed little reaction to a court ruling that temporarily blocked President Donald Trump from removing Fed Governor Lisa Cook, a case that is likely to end up before the U.S. Supreme Court.
Data on Tuesday also showed the economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, suggesting jobs growth was already stalling before Trump's aggressive tariffs on imports.
The data did not offer much insight into job creation since March, leaving U.S. rate expectations unchanged for now.
Currency
bid
prices at
10
September
​ 06:46
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 97.771 97.803 -0.02 per cent -9.88 per cent 97.934 97.5
index 93
Euro/Doll 1.1705 1.1709 -0.03 per cent 13.07 per cent $1.1731 $1.1
ar 683
Dollar/Ye 147.33 147.41 -0.09 per cent -6.4 per cent 147.62 147.
n 27
Euro/Yen 172.46​ 172.59 -0.08 per cent 5.66 per cent 172.9 172.
39
Dollar/Sw 0.7989 0.7976 0.16 per cent -11.97 per cent 0.7992 0.79
iss 62
Sterling/ 1.3534 1.3526 0.11 per cent 8.27 per cent $1.3567 $1.3
Dollar 514​
Dollar/Ca 1.3862 1.3841 0.17 per cent -3.59 per cent 1.3867 1.38
nadian 32
Aussie/Do 0.662 0.6586 0.55 per cent 7.03 per cent $0.6636 $0.6
llar 58
Euro/Swis 0.9349 0.9337 0.13 per cent -0.47 per cent 0.9355 0.93
s 26
Euro/Ster 0.8646 0.8651 -0.06 per cent 4.5 per cent 0.866 0.86
ling 41
NZ 0.5947 0.5925 0.4 per cent 6.31 per cent $0.5964 0.59
Dollar/Do 22
llar
Dollar/No 9.924​ 9.98 -0.56 per cent -12.68 per cent 9.9938 9.87
rway 67
Euro/Norw 11.6175 11.6852 -0.58 per cent -1.29 per cent 11.692 11.5
ay 807
Dollar/Sw 9.3524 9.3787 -0.28 per cent -15.11 per cent 9.3977 9.30
eden 59
Euro/Swed 10.9459 10.9818 -0.33 per cent -4.54 per cent 10.9895 10.9
en 127
