The dollar index (DXY00) slipped by -0.16% due to weaker-than-expected US Aug PPI report, raising expectations for a Fed rate cut next week. Safe-haven demand rose amidst heightened geopolitical tensions in Europe after Poland downed Russian drones.

US final-demand Aug PPI decreased to +2.6% y/y from July’s +3.1% y/y, with Aug PPI ex-food and energy at +2.8% y/y from July’s +3.4% y/y. Markets predict a -25 bp rate cut next week and a 76% chance of a second cut in October, totaling a -74 bp cut by year-end.

EUR/USD (^EURUSD) rebounded by +0.15% after an initial dip from the US Aug PPI report. Pressure from geopolitical risks in Europe was offset by support from central bank divergence and Thursday’s ECB meeting. Swaps show no expectation of a -25 bp ECB rate cut.

USD/JPY (^USDJPY) fell by -0.07% as the yen strengthened on reports of potential BOJ rate hikes and lower T-note yields. Political instability in Japan tempered gains as Prime Minister Ishiba resigned following election losses, hinting at a more expansionary fiscal policy.

Precious metal prices rose with December gold (GCZ25) up +0.29% and December silver (SIZ25) up +1.04%. Factors like a dovish US Aug PPI report, Fed rate cut expectations, and geopolitical tensions in Europe drove the increase. Gold prices benefited from central bank purchases and global equity market strength.

Gold prices are being supported by US tariffs, geopolitical risks, and political uncertainties in France and Japan. Fund buying of precious metal ETFs has also boosted prices, with gold holdings at a 2.25-year high and silver holdings at a 3-year high.

Read more at Yahoo Finance: Dollar Pressured by Fed Rate Cut Expectations