The dollar index rose 0.42% Thursday on strong US PPI data, reducing expectations for Fed rate cuts. The PPI report beat market expectations, signaling faster tariff pass-through at the wholesale level. July’s PPI and core PPI reports significantly surpassed forecasts. Markets adjusted expectations for Fed easing post-PPI report, now anticipating a 93% chance of a -25 bp rate cut in September.

US weekly initial unemployment claims fell by 3,000 to 224,000, and continuing claims dropped by 15,000 to 1.953 million, reflecting a relatively strong labor market. Fed officials Daly and Musalem expressed reservations about a -50 bp rate cut in September. Treasury Secretary Bessent clarified his previous statements on interest rates, not explicitly calling for multiple rate cuts.

Market focus shifts to the Trump-Putin summit for progress on the Russian-Ukrainian war. Trump downplayed expectations, calling it a “feel-out meeting.” Recent tariff updates include a 90-day extension with China and a 100% tariff on semiconductor imports. Trump also raised tariffs on Indian imports and teased upcoming tariffs on pharmaceuticals. Fed futures indicate a 93% chance of a -25 bp rate cut in September and 53% for another in October.

EUR/USD fell 0.49% due to dollar strength and concerns over US tariffs on the Eurozone. Market sentiment is cautious about the Trump-Putin summit’s impact on the Russia-Ukraine conflict. Swaps show a 7% chance of a -25 bp rate cut by the ECB in September. USD/JPY rose 0.27% on dollar strength and concerns over Japanese economy impact from US tariffs. Precious metals closed lower on Thursday due to a stronger dollar and hawkish PPI report, despite ongoing safe-haven demand related to geopolitical risks. Gold and silver prices remain supported by fund buying and ETF inflows.

Read more at Yahoo Finance: Dollar Sees Support from Strong US PPI Report