US Dollar Mixed on PPI, Index Slips Below 97

The US dollar is mixed against most currencies at the end of the trading week, driven by the latest inflation numbers. The greenback is also finding direction on expectations that the central bank will cut interest rates at the end of the month, according to signals during this week’s semi-annual testimony in front of Congress and latest Federal Open Market Committee (FOMC) minutes.

In June, wholesale prices rose at a modest 0.1%, the Bureau of Labor Statistics (BLS) reported. This is higher than the market forecast of a 0.1% slide, suggesting that inflation continues to be muted. On a year-over-year basis, the producer price index (PPI) dipped from 1.8% in May to 1.7% last month, the lowest level since January 2017.
According to the US government, wholesale energy prices tumbled 3.1%, while wholesale food surged 0.6%. When excluding volatile food and energy, the core PPI was flat in June following two consecutive months of 0.4% gains. The annual rate of increase in core prices fell from 2.3% to 2.1%.
In other data, initial jobless claims for the week ending July 6 clocked in at a lower-than-expected of 209,000. This is below the previous week’s 222,000 and the median estimate of 225,000.
This week, Federal Reserve Chair Jerome Powell completed his two-day testimony in front of the House of Representatives and the Senate. He essentially made the case that a rate cut is necessary, despite strong job growth and commendable economic gains. Investors now believe it is a certainty that the Fed will impose a quarter-point rate cut at the end of the month. Also, according to the CME Group FedWatch tool, a growing segment of the market is penciling a 50-basis-point reduction.
Moreover, minutes from last month’s FOMC meeting indicate that Fed officials would be willing to support a rate cut if risks and uncertainties “continued to weigh on the economic outlook.” The Fed only declined a June rate reduction because the deterioration of the economic outlook was “recent.” Overall, the minutes reveal that Board of Governors has Powell’s back.
The US Dollar Index fell 0.21% to 96.84, from an opening of 97.08. It is poised for a weekly slide of 0.45%, bringing its year-to-date gain to just 0.7%.
The USD/CAD currency pair fell 0.26% to 1.3037, from an opening of 1.3070, at 18:15 GMT on Friday. The GBP/USD climbed 0.33% to 1.2562, from an opening of 1.2521.

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