Dollar Stalls at 99.9; Odds of Fed Hike Diminish
The US Dollar Index traded relatively flat around the 99.9 level on Friday (August 14). The dollar has lacked clear direction after subdued US inflation data caused markets to scale back expectations for a Federal Reserve interest rate hike in September.
US Producer Price Index (PPI) data released on Thursday showed no month-over-month increase in producer prices for July. This result reinforced signals from the previous day's Consumer Price Index (CPI) data that inflationary pressure has not significantly accelerated.
The combination of relatively moderate CPI and PPI figures has eased pressure on the Fed to raise interest rates soon. Markets now estimate the probability of a 25-basis-point hike in September at around 35%, a sharp drop from approximately 55% just a week earlier.
Recent inflation data also indicates that the initial impact of the energy price surge caused by the Middle East conflict is beginning to subside. This has helped temper inflation expectations and acted as a factor limiting the dollar's appreciation.
However, risks remain. Uncertainty surrounding the US-Iran deal and the reopening of the Strait of Hormuz could still trigger a rise in oil prices. Should energy prices surge again, inflationary pressure could mount, reigniting expectations of a Fed rate hike.
Newsmaker Analysis: The DXY remains in a consolidation phase near the psychological 100 level as markets weigh cooling inflation against geopolitical risks. As long as US data remains dovish, the dollar may struggle to consistently break above the 100 mark. Conversely, a spike in oil prices or stronger economic data could provide renewed support for the greenback. (asd)
Source: Newsmaker.id
