USD weakens as cooling PPI data reinforces Fed rate cut expectations

The US dollar showed volatility following cooler-than-expected Producer Price Index data, with equity futures rising 0.5% as markets priced in higher probability of Federal Reserve rate cuts. The PPI reading came in below forecasts, suggesting easing inflationary pressures at the wholesale level. This development strengthens the case for the Fed to begin its easing cycle, potentially as soon as the September meeting. Major dollar pairs showed mixed reactions, with EUR/USD gaining ground while commodity currencies remained under pressure. The data reinforces the narrative that US inflation is moderating toward the Fed's 2% target, reducing support for the dollar's yield advantage. Traders are now focused on upcoming CPI data for confirmation of the disinflationary trend. Technical indicators suggest the dollar index faces resistance at 101.50, with potential for further weakness if inflation data continues to disappoint.