Euro edges higher against US Dollar after soft US PPI data

EUR/USD holds above 1.1500 after softer-than-expected US PPI data.
Cooling US inflation and weaker payrolls reduce the chances of a September Fed rate hike.
The ECB is widely expected to raise interest rates next month.

Vishal Chaturvedi FXStreet

EUR/USD holds modest gains on Thursday as softer-than-expected US Producer Price Index (PPI) data fails to trigger a strong reaction in the pair. At the time of writing, EUR/USD trades around 1.1537 after recovering from an intraday low of 1.1511, its lowest level in more than a week.

Data released by the US Bureau of Labor Statistics showed that the headline PPI was unchanged in July after falling by 0.1% in June, while the annual rate eased to 4.7% from 5.5%. Core PPI rose by 0.2% MoM, down from 0.4%, while the annual rate slowed to 4.2% from 4.7%.

The report follows Wednesday’s broadly in-line Consumer Price Index (CPI) data, which showed both headline and core inflation easing on an annual basis. Together with the weaker-than-expected July Nonfarm Payrolls (NFP) report, the latest inflation figures have dampened expectations for a Federal Reserve (Fed) interest-rate hike.

According to the CME FedWatch Tool, markets now assign a 32% probability of a September rate hike, down from 55% a week ago. The repricing weighs on the US Dollar Index (DXY), which retreats below the 100 psychological mark after touching a two-week high earlier in the day.

US Treasury yields are also falling across the curve. The 2-year yield, which is particularly sensitive to expectations for Fed policy, trades around 4.14%, its lowest level since July 17.

However, the pair’s muted response suggests traders are reluctant to build large positions as elevated energy prices and the lack of progress toward reopening the Strait of Hormuz keep upside inflation risks in place.

Cleveland Fed President Beth Hammack said on Thursday that the latest two inflation reports were “welcome news,” although she was not confident that the progress would continue. She added that the labour market is stable, while inflation caused by supply shocks has proved more persistent. “My view is we need to act now,” Hammack said.

While expectations for a September Fed rate hike have eased, markets still see the ECB raising rates next month. A Reuters poll conducted from August 10 to 13 showed that 57 of 69 economists expect the ECB to raise its deposit rate by 25 basis points (bps) to 2.50% in September.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.16%	-0.11%	-0.22%	0.00%	-0.02%	0.07%	-0.26%
EUR	0.16%		0.05%	-0.07%	0.12%	0.14%	0.21%	-0.11%
GBP	0.11%	-0.05%		-0.11%	0.08%	0.10%	0.16%	-0.17%
JPY	0.22%	0.07%	0.11%		0.21%	0.21%	0.25%	-0.05%
CAD	0.00%	-0.12%	-0.08%	-0.21%		-0.00%	0.07%	-0.27%
AUD	0.02%	-0.14%	-0.10%	-0.21%	0.00%		0.07%	-0.26%
NZD	-0.07%	-0.21%	-0.16%	-0.25%	-0.07%	-0.07%		-0.30%
CHF	0.26%	0.11%	0.17%	0.05%	0.27%	0.26%	0.30%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Vishal Chaturvedi

FXStreet

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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