🏛️ Chance of a September interest rate cut slightly decreases after data release
U.S. producer inflation unexpectedly rebounded strongly (Core PPI: +3.7% vs 2,9% estimate) after last month’s mild reading suggested a limited impact of Donald Trump’s tariffs on producer goods prices.
The strongest pressure was seen in the food sector (vegetables: +39%), heating oil and distillates (+15%), and diesel fuel (+12%). Tariff-related pressure also appeared in steel and iron scrap prices (+4.5%) and electronics (+5%).
Source: XTB Research
The overall pattern of individual contributions points to growing price pressure in the industrial sector, whose products are gradually emerging as a new source of inflation in the U.S. Until now, services had been the main inflationary driver, but rising material costs and concerns over supply chains could, after the introduction of tariffs, soon feed into prices across a wide range of goods.
According to the swap market, investors have not significantly changed their expectations for the September Fed meeting despite the PPI inflation surprise. At present, the probability of a 25 bps cut is estimated at 94%, compared with 98% before the report.
On the EUR/USD pair, the H1 timeframe briefly tested the 200-period exponential moving average (gold line on the chart), which from a technical perspective could serve as an important support level. However, the early downward momentum was relatively quickly contained, suggesting that investors have not fully shifted their expectations for a September Fed rate cut — a dovish move for the dollar itself. Source: xStation5
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