• US Dollar continues losing ground in light of weak CPI figures and UoM data.
• Markets still foresee a September rate cut.
• Despite hot PPI data, US Treasury yields are falling, diminishing allure of USD.

The US Dollar Index (DXY) remains weak on Friday, sitting at April lows. This is largely a response to the soft US Consumer Price Index (CPI) figures on Thursday, combined with softer University of Michigan (UoM) sentiment data, both supporting the prospect of a Federal Reserve (Fed) rate cut in September.

Although the market’s confidence in a pending rate cut is growing, Fed officials have maintained a careful approach, emphasizing their dependence on rigorous data analysis before initiating such substantial changes.

Daily digest market movers: DXY wanes despite rising PPI

• US Producer Price Index (PPI) for final demand rose to 2.6% YoY in June, an increase from 2.2% last month, as revealed by the US Bureau of Labor Statistics (BLS) on Friday. This outcome exceeded market expectations of 2.3%.
• Annual core PPI increased by 3% during the same period, surpassing both the previous month’s rise and the anticipated market figure of 2.3%.
• On a monthly basis, PPI and core PPI escalated by 0.2% and 0.4%, respectively.
• Despite positive PPI data, soft CPI figures and softer UoM sentiment data (reported at 66.0 versus the forecast of 68.5 and the previous value of 68.2) continue to bolster the argument for a September rate cut.
• CME FedWatch Tool now shows an 86% probability of a 25-basis-point cut in September, and some investors bet on a 50-basis-point cut

DXY technical outlook: Bearish sentiment worsens as DXY breaches 200-day SMA

The DXY Index’s breach of its 200-day Simple Moving Average (SMA) has intensified the negative outlook for the USD, with indicators including the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) still deep in a negative trajectory.

The index now trades at its lowest level since April, amplifying the bearish sentiment. But after losing more than 0.80% in just two sessions, a slight upward correction may be possible. However, the overall technical outlook remains bearish.