The dollar is under pressure, which helps the euro to make further gains. Economic data from the USA could prompt the US central bank to adopt a more cautious interest rate policy, which tends to weigh on the dollar.
In the FX market, the dollar is weakening on speculation of a slower rate hike pace. Market observers now assume that the US Federal Reserve will hike interest rates by 0.5 percentage points in September and not a third time by 0.75 percentage points. The greenback fell against several major currencies, while the euro, in turn, rallied 0.4 percent to $1.0335. Interest rate speculation was underpinned by new data on producer prices in the USA. They are no longer picking up quite as quickly as they have recently and are signaling a gradual ebbing of the wave of inflation. In July, they climbed 9.8 percent year-on-year, according to the Department of Labor. Economists had expected growth of 10.4 percent after 11.3 percent in June.
In the statistics, the prices are listed from the factory gate, i.e. before the products are further processed or traded. They therefore provide early signals for the development of consumer prices. These rose by 8.5 percent in July, after an increase of 9.1 percent in June. The US monetary authorities can book the declining rate of inflation as a stage victory, since they recently fought the escalating inflation with unusually large interest rate hikes.
In the commodity market, oil prices rose after the International Energy Agency (IEA) raised its forecast for oil demand this year by 380,000 to an average of 2.1 million barrels a day. The hot summer and the sharp rise in gas prices are boosting the use of oil to generate electricity. The price of a barrel of Brent crude oil from the North Sea rose by 1.4 percent to just under $98.70 per barrel, while US light oil WTI was traded 1.8 percent higher at $93.60.