US Dollar Mixed on PPI, Index Slips Below 97

The  US dollar is mixed against most currencies at  the  end of  the  trading week, driven by  the  latest inflation numbers. The  greenback is also finding direction on  expectations that the  central bank will cut interest rates at  the  end of  the  month, according to  signals during this week’s semi-annual testimony in  front of  Congress and  latest Federal Open Market Committee (FOMC) minutes.

In June, wholesale prices rose at a modest 0.1%, the Bureau of  Labor Statistics (BLS) reported. This is higher than the  market forecast of  a  0.1% slide, suggesting that inflation continues to  be muted. On  a  year-over-year basis, the  producer price index (PPI) dipped from 1.8% in  May to  1.7% last month, the  lowest level since January 2017.
According to  the  US government, wholesale energy prices tumbled 3.1%, while wholesale food surged 0.6%. When excluding volatile food and  energy, the  core PPI was flat in  June following two consecutive months of  0.4% gains. The  annual rate of  increase in  core prices fell from 2.3% to  2.1%.
In  other data, initial jobless claims for  the  week ending July 6 clocked in  at  a  lower-than-expected of  209,000. This is below the  previous week’s 222,000 and  the  median estimate of  225,000.
This week, Federal Reserve Chair Jerome Powell completed his two-day testimony in  front of  the  House of  Representatives and  the  Senate. He essentially made the  case that a  rate cut is necessary, despite strong job growth and  commendable economic gains. Investors now believe it is a  certainty that the  Fed will impose a  quarter-point rate cut at  the  end of  the  month. Also, according to  the  CME Group FedWatch tool, a  growing segment of  the  market is penciling a  50-basis-point reduction.
Moreover, minutes from last month’s FOMC meeting indicate that Fed officials would be willing to  support a  rate cut if risks and  uncertainties “continued to  weigh on  the  economic outlook.” The  Fed only declined a  June rate reduction because the  deterioration of  the  economic outlook was “recent.” Overall, the  minutes reveal that Board of  Governors has Powell’s back.
The  US Dollar Index fell 0.21% to  96.84, from an  opening of  97.08. It is poised for  a  weekly slide of  0.45%, bringing its year-to-date gain to  just 0.7%.
The  USD/CAD currency pair fell 0.26% to  1.3037, from an  opening of  1.3070, at  18:15 GMT on  Friday. The  GBP/USD climbed 0.33% to  1.2562, from an  opening of  1.2521.

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