EUR/USD remains under pressure as the US Dollar (USD) refreshes its weekly high during European trading hours on Thursday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to nearly 101.80. The Greenback gains further as signs of stickiness in the United States (US) Consumer Price Index (CPI) data for August forced traders to pare bets supporting the Federal Reserve (Fed) to start reducing interest rates this month aggressively.
Wednesday’s CPI data showed that the annual core inflation – which excludes volatile food and energy prices – rose by 3.2%, as expected. The monthly core CPI rose by 0.3%, faster than estimates and the prior release of 0.2%. However, the annual headline CPI grew by 2.5%, slower than the expected 2.6% and July’s print of 2.9% due to lower energy prices. Historically, Fed officials give more weightage to core inflation as it excludes those volatile items, which are guided by global and environmental forces.
The sticky US core inflation data cemented market expectations for the Fed to begin reducing its key borrowing rates gradually. According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September has diminished to 13% from 40% a week ago.
In Thursday’s session, market participants will focus on the US Producer Price Index (PPI) data for August and the Initial Jobless Claims data for the week ending September 6, which will be published at 12:30 GMT. The significance of the jobless claims data has increased as recent comments from an array of Fed officials signal that the central bank has become more concerned about reviving job growth.
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