- The weakening US dollar, following disappointing PPI data, could lead to an increase in EUR/USD.
- U.S. PPI dropped by 0.1% month-over-month in August, raising expectations for a rate cut by the Fed next week.
- Attention will shift towards Thursday’s U.S. CPI and upcoming ECB policy decisions.
On Wednesday, the Euro (EUR) is experiencing a slight rise against the US dollar (USD). This increase comes as the Greenback lost strength after the US producer price index (PPI) registered a decline, which has fueled market predictions of rate cuts by the Federal Reserve in the coming week.
Currently, the EUR/USD pair is hovering around 1.1710, briefly reaching its highest point since July 24. Meanwhile, the US Dollar Index (DXY), which measures the greenback against a mix of six major currencies, sits near 97.70.
The PPI report for August indicated significant pressure at the wholesale level, with prices rising much less than the anticipated 0.3%. The previous July reading was adjusted down from 0.9% to 0.7%, and now to 0.1% month-over-month. Yearly headline inflation also slowed to 2.6%, down from a forecast of 3.3%. Additionally, the core PPI—excluding food and energy—fell by 0.1% month-over-month, with the annual rate decreasing from 3.7% to 2.8%. Though these softer figures support speculation for policy easing, analysts caution that the data is not weak enough to warrant a 50 basis point cut.
Looking ahead, the focus will be on two important events set for Thursday: the U.S. Consumer Price Index (CPI) and the monetary policy decision from the European Central Bank (ECB). The CPI results will be a crucial inflation marker before next week’s Fed meeting. Meanwhile, it is generally believed that the ECB will keep rates steady after previously reducing the deposit rate to 2.0% following several earlier cuts this year. With inflation in the eurozone close to the 2% target and wage growth pressure alleviating, it seems that the ECB’s cycle of easing is nearing its conclusion.
