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Signs of weaker inflation weigh heavily on US dollar

currency-newsSigns of weaker inflation weigh heavily on US dollar
US dollar exchange rates came under pressure as July’s core producer price index saw a surprise decline, suggesting that US inflation is weaker than previously thought.

This weakness raises the risk of the Federal Reserve maintaining a dovish bias at its next policy meeting, increasing the chances of interest rates seeing a cut before the end of the year.

Although the latest set of initial and continuing jobless claims figures bettered expectations this was not enough to lift USD exchange rates last week.

In spite of the latest deterioration in trade relations between the US and China the US dollar failed to benefit from any particular sense of market risk aversion.

July’s industrial and manufacturing production figures could improve confidence in the outlook of the world’s largest economy, however.

Evidence that the US industrial sector is shrugging off the prospect of further trade tariffs may lift USD exchange rates once again.

Even so, if August’s University of Michigan consumer sentiment index highlights a lower level of domestic confidence the US dollar could struggle to return to a bullish trend.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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