Forex Today: US Dollar extends decline as softer PPI lifts major currencies and Gold

Here is what you need to know for Thursday, July 16:

The US Dollar Index (DXY) falls 0.5% toward 100.40 as softer-than-expected United States (US) wholesale inflation reinforces signs that price pressure is easing. The headline Produce Price Index (PPI) declined 0.3% MoM in June, while the annual rate slowed to 5.5%, below the 6.2% forecast. Core PPI rose 0.2% MoM and 4.7% YoY, also missing expectations. The data reduced the pressure on the Federal Reserve (Fed) to raise interest rates at its July meeting.

Fed Chair Kevin Warsh said recent inflation figures remain an imperfect measure of underlying inflation and acknowledged that he is not satisfied with the current inflation readings. However, he described the labor market as broadly balanced and said inflation would not remain permanently elevated. New York Fed President John Williams also welcomed the latest Consumer Price Index (CPI) figures but stressed that the Fed does not have a clear direction regarding where interest rates are heading.

EUR/USD advance toward 1.1475, up 0.45%, supported mainly by broad Greenback weakness. Spain’s final Harmonized Index of Consumer Prices (HICP) held at 3.6% YoY in June, unchanged from May and in line with the preliminary estimate. National CPI remained at 3.2% YoY. The still elevated HICP reading may limit expectations of aggressive European Central Bank (ECB) easing.

GBP/USD rallied toward 1.3550, gaining more than 1% as the Pound Sterling outperformed its major peers. In addition to the weaker US Dollar, Sterling receives support from reports that the United Kingdom’s incoming political leadership could appoint a fiscally conservative finance minister. Expectations that the Bank of England may keep interest rates elevated because of renewed energy price risks also support the British currency.

USD/JPY trades lower near 162.00 as the Japanese Yen recovers modestly following the broad retreat in the US Dollar. However, the pair remains close to historically elevated levels, with the Yen still struggling to generate a sustained recovery despite softer US inflation data.

AUD/USD rises toward 0.7020, supported by USD weakness and stronger components of the latest Chinese economic report. China’s economy expanded 0.9% QoQ in the second quarter, while annual growth slowed to 4.3%. However, Industrial Production increased 5.3% YoY, and Retail Sales rose 1.0%, helping the China-sensitive Australian Dollar overcome concerns about slower headline growth.

West Texas Intermediate (WTI) Oil trades nearly unchanged at around $80 per barrel. Prices remain close to a one-month high as investors monitor renewed US strikes against Iran and the reinstatement of the naval blockade, which has increased concerns about supplies moving through the Strait of Hormuz.

Gold advances toward $4,068 per troy ounce, gaining around 0.2%. The precious metal is supported by the weaker US Dollar and falling Treasury yields following the soft PPI report, although elevated Oil prices and persistent inflation uncertainty continue to complicate the Fed’s policy outlook.

On Thursday, attention will turn to US Retail Sales, Initial Jobless Claims, and the Philadelphia Fed Manufacturing Survey, Business Inventories, and Pending Home Sales will follow. The reports could determine whether the US Dollar extends its decline after this week’s softer CPI and PPI readings.