The US dollar could remain under pressure following the release of the Producer Price Index as traders monitor the direction of inflation.
Data showed an increase of 0.1% month-over-month in July 2024, following a 0.2% rise in June.
The PPI was below expectations, which were targeting a 0.2% value. The PPI data fueled expectations of a softer monetary policy and stronger bets on interest rate cuts.
Anticipation that the Federal Reserve may cut interest rates could continue to weigh on the greenback. A 50 basis point cut is expected in September followed by several 25 basis point decreases afterwards. The latter could lead to a slide of the dollar as cuts materialize.
The decline in yields and the dollar could favor other assets like gold. All eyes are now on the upcoming Consumer Price Index (CPI) US inflation data that will be released tomorrow. If inflation figures come in softer than expected, the dollar could see more selling pressure and lower treasury yields.
The recent drop in Treasury yields reflects market expectations based on upcoming inflation data.
