Dollar steadies as hot wholesale inflation data tempers rate cut fervour
The dollar held on to previous session gains on Friday after hotter than expected inflation data prompted traders to trim wagers on rate cuts by the U.S. Federal Reserve.
The euro and sterling were steady against the dollar after falling 0.5% and 0.3% on Thursday, respectively, while the Japanese yen rose 0.3% to 147.395 following stronger-than-expected GDP data for the second quarter.
Overnight, markets had to contend with U.S. producer prices showing the quickest rise in three years in July amid a surge in the costs of goods and services, pointing to a broad pick up in inflationary pressures which analysts say could pose a dilemma for the Fed.
The hot measure of producer price inflation followed a comforting consumer inflation outcome earlier in the week which had boosted expectations of policy easing in the world's largest economy and helped lift risk assets across the board.
Odds of a 25-basis-point cut by the U.S. central bank retreated slightly after the producer price figures, per CME's FedWatch tool.
A combination of supportive data and remarks from the U.S. Treasury Secretary had also given rise to the possibility of an outsized 50-basis-point rate cut in September but those expectations were wiped out entirely after Thursday's data.
The wholesale U.S. inflation data "warranted a move in front-end rates and firmer dollar ... but a 25-basis-point cut at the Fed's September meeting remains the default setting," said Chris Weston, head of research at Pepperstone.
The 2-year U.S. Treasury yield was steady in early Asia trading at 3.7262% after rising by as much as 5 basis points on Thursday. On the far end of the curve, the 10-year U.S. Treasury yield was at 4.2849% after rising by a similar degree overnight.
More immediately, the focus will also be on a summit between U.S. President Donald Trump and Russian leader Vladimir Putin scheduled for Friday in Alaska.
Trump said on Thursday that he believes Putin is ready to end his war in Ukraine, but peace would likely require at least a second meeting involving Ukraine's leader.
More immediately, the focus will also be on a summit between U.S. President Donald Trump and Russian leader Vladimir Putin scheduled for Friday in Alaska.
Trump said on Thursday that he believes Putin is ready to end his war in Ukraine, but peace would likely require at least a second meeting involving Ukraine's leader.
Source : Reuters
