Dollar Drops After Soft US PPI - CPT Markets

Market Wrap-up: US PPI Cools While Middle East Risks Stay Elevated

US wholesale prices unexpectedly declined in June as lower energy costs extended the disinflationary signal seen in the latest CPI report, reinforcing expectations that the recent inflation surge may have peaked.

According to the US Bureau of Labor Statistics (BLS) report released on July 15, the Producer Price Index (PPI) fell 0.3% month on month on a seasonally adjusted basis, compared with Dow Jones expectations for unchanged readings. On an annual basis, headline PPI increased 5.5%.

May's PPI data was also revised sharply lower, from an initially reported 1.1% increase to 0.6%. Excluding food and energy, core PPI rose 0.2%, below expectations for a 0.3% increase. Core PPI excluding trade services increased 0.1% month-on-month and 5.1% year on year.

Similar to consumer inflation, producer prices benefited from easing energy costs, particularly as oil prices softened during the temporary de-escalation of US-Iran tensions.

However, geopolitical risks remained elevated throughout the week as the US military continued conducting airstrikes against Iran while Washington reimposed maritime restrictions on Tehran's ports near the Strait of Hormuz.

Despite the renewed geopolitical tensions, softer US inflation data dominated market pricing. The US Dollar Index (DXY) fell more than 0.5% after the release, slipping below the 100.40 level as traders further reduced expectations for additional Fed tightening. The weaker dollar also provided support for gold, with the precious metal trading around USD 4,040/oz.

Major currencies broadly strengthened against the greenback. The euro climbed to its highest level in more than two weeks, sterling advanced to a fresh two-month high, while the Japanese yen also gained despite broader market positioning still favouring yen weakness.

Looking ahead, traders will focus on a busy US economic calendar, including Retail Sales, the Philadelphia Fed Manufacturing Index, Initial Jobless Claims, and speeches from several FOMC members.

XAU/USD: Gold Rebounds as Soft US PPI Cuts Fed Hike Bets 

Key takeaway:

Gold trimmed earlier losses on July 15 after softer-than-expected US PPI data reinforced expectations that Fed rate hikes may be less likely in the near term. However, persistent inflation concerns and escalating Middle East tensions continued to limit downside pressure.

According to the CME FedWatch Tool, the probability of a Fed rate hike at the July meeting fell to 10.2% following the data release, down from 16.6% previously.

Earlier this week, US CPI data also pointed to a sharper-than-expected moderation in consumer inflation.

Technical Outlook:

Daily Bias: Bearish

Support: 3,982

Resistance: 4,080

WTI: Oil Holds Steady Despite Escalating Middle East Tensions 

Key takeaway:

WTI crude traded little changed on July 15 as markets balanced renewed geopolitical risks against softer US inflation expectations.

The US military continued airstrikes against Iran while Washington reimposed maritime restrictions on Tehran's ports near the Strait of Hormuz. Later on July 15 (US time), US Central Command (CENTCOM) confirmed another round of strikes targeting dozens of military sites near the strategic waterway.

Analysts believe oil prices could retest the USD 100 per barrel level if the current conflict persists for several more weeks, with further upside possible should regional energy infrastructure become a direct target.

Technical Outlook:

Daily Bias: Cautiously Bullish

Support: 78.81

Resistance: 82.00

DXY: Dollar Extends Losses After Softer US Inflation Data 

Key takeaway:

The US Dollar Index fell to its lowest level in several weeks as expectations for another Fed rate hike eased.

Softer-than-expected CPI and PPI readings reinforced the view that US inflation pressures are moderating, weighing on the dollar and supporting a weaker near-term outlook.

Nevertheless, expectations for at least one additional 25 basis point Fed rate hike remain in play, which could continue to limit downside momentum for the greenback.

Technical Outlook:

Daily Bias: Bearish

Support: 100.20

Resistance: 100.50

EUR/USD: Euro Climbs as Softer US Inflation Pressures USD 

Key takeaway:

The euro strengthened as weaker US PPI data placed additional pressure on the US dollar.

Meanwhile, Spain's final June HICP remained unchanged at 3.6% year-on-year, matching May's reading, while monthly inflation rose 0.6%.

The data suggests inflation remains persistent in one of the euro area's largest economies, which may help curb expectations for aggressive policy easing by the European Central Bank.

Technical Outlook:

Daily Bias: Bullish with Correction Risk

Support: 1.14060

Resistance: 1.14729

USD/JPY: Yen Strengthens on Intervention Warnings and Weak USD 

Key takeaway:

The Japanese yen strengthened following intervention warnings from Japanese authorities and softer US inflation data.

Japanese Finance Minister Satsuki Katayama stated that authorities stand ready to take appropriate action in the currency market whenever necessary. She added that officials will continue monitoring market developments and economic data to safeguard financial stability.

Market participants increasingly view the area below 162 as a key support zone, helping explain why rallies above 162.50 have repeatedly faded while the cycle high at 162.84 has remained untouched.

Technical Outlook:

Daily Bias: Bearish

Support: 161.61

Resistance: 162.28

Softer US inflation data remains the dominant driver across global markets, reinforcing expectations that price pressures are easing and reducing the urgency for further Fed tightening. That repricing pushed the US dollar lower, supported gold, and lifted major currencies despite renewed geopolitical tensions in the Middle East.

Oil, meanwhile, continues to draw support from supply risk as US military operations against Iran and maritime restrictions near the Strait of Hormuz keep the geopolitical premium intact. Even so, softer inflation expectations have prevented energy prices from triggering a broader risk-off move across financial markets.

Attention now shifts to US Retail Sales, the Philadelphia Fed Manufacturing Index, Initial Jobless Claims, and speeches from FOMC officials. These releases will help determine whether the recent dovish repricing extends or whether Fed expectations begin to stabilize again.

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