While the dollar was struggling to recover as geopolitical risks between the US and the North- Korea heightened after the two presidents exchanged war of words, data on producer prices and initial jobless claims came in lower than expected, pushing the currency further down.
According to the figures published by the US Bureau of labor Statistics on Thursday, US PPI decreased by 0.1% in July month-on-month, driven mainly by declining energy and services prices. This downfall, which was the biggest one in 11 months, surprised analysts who expected producer prices to climb by 0.1% instead as with a month ago. On a yearly basis, PPI continued its downward path, slipping to 1.9% from 2% in June and missing the forecast of 2.2%.
Excluding energy and food prices, core PPI fell by 0.1% month-on-month, while analysts anticipated the index to rise by 0.1 percentage points to 0.2%. The annual rate stood at 1.8%, which was below the 1.9% observed last month and the forecast of 2.1%.
Regarding labor data, the number of people applying for unemployment benefits for the first time rose by 3,000 to 244,000 (seasonally adjusted) during the week ending August 5. Analysts expected initial jobless claims to decline to 240,000. However, the 4-week average figure dropped by 1,000 to 241,000.
Taking the above numbers into account, markets are less confident that the Fed will deliver another rate hike this year, as Fed policymakers will want to see evidence that inflation is moving back towards 2% goal before raising rates further. The next key data on focus will be tomorrow's CPI figures which should shed more light on the path of the US inflation.
Looking at the reaction in the forex markets, the dollar weakened against its rivals following the release of the data. The dollar index fell to a session low of 93.35 from 93.56 before it climbed to 93.40. Euro/dollar edged up from 1.1747 to 1.1754, while the yen gained the most, with dollar/yen sinking by 0.37% to an eight-week low of 109.31.