The U.S. dollar edged lower on Thursday after weaker producer price data reinforced expectations of a Federal Reserve rate cut, turning investor focus to upcoming consumer price figures and the European Central Bank’s policy meeting later in the day.
By 03:00 ET (08:00 GMT), the Dollar Index, which measures the greenback against six major currencies, slipped 0.2% to 97.510, reversing earlier gains from the start of the week.
Dollar under pressure ahead of CPI
The dollar weakened after U.S. producer price inflation came in softer than expected, with headline and core PPI both falling 0.1% month-on-month. Analysts noted the decline was driven by a sharp 1.7% drop in trade services, suggesting companies are absorbing tariff-related costs rather than passing them on to consumers.
Traders are now watching the U.S. CPI release for August, expected to show a 2.9% annual rise and 3.1% for the core measure. Markets have already priced in a 25-basis-point Fed rate cut next week, making only a significant upside surprise likely to challenge that view.
Earlier in the week, the dollar found temporary support from safe-haven demand after Poland and NATO shot down drones linked to Russian airstrikes near Ukraine.
Euro steady before ECB verdict
In Europe, the euro traded slightly lower at 1.1693 against the dollar as investors awaited the ECB’s latest policy decision. Rates are widely expected to remain unchanged after being halved to 2% by June, with inflation back at target and growth stabilizing.
However, uncertainty remains over U.S. tariffs on EU goods and political turmoil in France, which may prompt dovish signals from policymakers. Analysts expect EUR/USD to stabilize between 1.170 and 1.175 through the weekend.
Other currency moves
The British pound slipped 0.1% to 1.3514, holding steady ahead of key U.K. jobs and inflation data next week.
The yen weakened as USD/JPY rose 0.2% to 147.77 after Japan’s PPI fell 0.2% in August, though year-on-year growth held at 2.7%. Analysts noted wholesale inflation pressures could spill into next week’s CPI data.
Meanwhile, USD/CNY traded slightly higher at 7.1227 after softer Chinese inflation figures weighed on the yuan. The Australian dollar eased 0.2% to 0.6607, consolidating after reaching a 10-month high earlier in the week.
