Key facts
- The U.S. dollar hovered near a one-month low as soft inflation data reinforced bets the Federal Reserve will remain patient on interest rate hikes.
- U.S. producer prices unexpectedly fell in June, marking their biggest decline in 14 months.
- Consumer inflation data and a slowdown in job growth effectively rule out a Fed rate increase in July.
- Escalation in Middle East hostilities kept oil prices near one-month highs, posing an upside risk to the inflation outlook.
- Brent crude futures traded near a one-month high at $85.28 a barrel.
The U.S. dollar hovered near a one-month low on Thursday, as soft inflation data reinforced expectations that the Federal Reserve will remain patient on interest rate hikes. Meanwhile, escalating Middle East hostilities added an upside risk to the inflation outlook.
The greenback slipped against the Japanese yen for the third consecutive trading session, while the euro and sterling saw modest gains. The U.S. dollar index, tracking the currency against six major peers, was little changed and near its lowest level since June 18.
U.S. producer prices unexpectedly fell in June, marking their biggest decline in 14 months, adding to evidence that inflation was easing. This data, along with softer consumer inflation and a slowdown in job growth, effectively rules out a Federal Reserve interest rate increase this month. Market expectations for a July hike were significantly reduced, though even odds remain for at least a 25 basis-point increase in September.
Analysts suggest the recent dollar weakness is a correction from previous highs, with markets having aggressively priced in a July rate hike that now appears overblown. However, the overall tightening trajectory is expected to remain intact, and the flare-up in the Middle East is likely to limit further downside for the dollar.
Oil prices rose for a fourth consecutive day, with Brent crude futures trading near a one-month high, as the U.S. conducted strikes on Iran's coastal defenses and missile sites, while Iran threatened to shut off more regional energy exports.