Dollar Loses Ground As Inflation Data Raises Rate Cut Bets
September 12 2024 - 12:07PM
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The U.S. dollar fell on Thursday amid rising prospects of an
interest rate cut by the Federal Reserve next week, and probability
of more reductions before the end of the year, in the wake of the
recent data on inflation.
The U.S. Labor Department said its producer price index for
final demand crept up by 0.2% in August, while revised data showed
prices were unchanged in July.
Economists had expected producer prices to inch up by 0.1%,
matching the uptick originally reported for the previous month.
At the same time, the report said the annual rate of producer
price growth slowed to 1.7% in August from a downwardly revised
2.1% in July.
The year-over-year increase by producer prices was expected to
decelerate to 1.8% from the 2.2% originally reported for the
previous month.
While the data has seemingly reduced the likelihood the Federal
Reserve will cut rates by 50 basis points next week, rates are
still expected to be notably lower by the end of the year.
CME Group's FedWatch Tool currently suggests rates will lower by
at least a full percentage point following the Fed's December
meeting.
A separate data from the Labor Department showed initial jobless
claims rose to 230,000 in the week ended September 7th, an increase
of 2,000 from the previous week's revised level of 228,000.
Economists had expected jobless claims to inch up to 230,000.
The European Central Bank lowered its interest rate by 25 basis
points today, marking the second cut this year.
The dollar index dropped to 101.23, losing nearly 0.5%.
Against the Euro, the dollar weakened to 1.1078 from 1.1014, and
against Pound Sterling, it eased to 1.3128 from 1.3042 a unit of
the British currency.
The dollar weakened against the Japanese currency by nearly 0.4%
to 141.82 yen. Against the Aussie, the dollar shed more than 0.7%
at 0.6723.
The Swiss franc gained marginally against the dollar at CHF
0.8511, while the Loonie edged down slightly to C$ 1.3582 a U.S.
dollar.
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