The US Dollar (USD) bounced back on Thursday, reclaiming the 104.00 level as traders reacted to softer-than-expected Producer Price Index (PPI) data and positive jobless claims figures. The US Dollar Index (DXY) initially jumped following the data release but later pared gains as investors weighed the implications of slowing inflation and potential demand concerns. Meanwhile, United States (US) diplomats arrived in Russia for ceasefire talks over Ukraine, and President Donald Trump escalated trade tensions by threatening a 200% tariff on European wines and champagnes.
Mixed economic signals, geopolitical tensions rise
The US weekly jobless claims report showed initial claims at 220,000, lower than the expected 225,000. Continuing claims dropped to 1.87 million, below the forecast of 1.90 million.
The February Producer Price Index (PPI) came in weaker than expected, with the headline monthly figure at 0.0% vs. 0.3% expected, and the core PPI contracting by 0.1%.
On a yearly basis, the headline PPI eased to 3.2%, below the projected 3.3%, while the core PPI declined to 3.4% from 3.6%.
Markets initially viewed the softer inflation data as positive for the US dollar, but gains were quickly reversed as traders interpreted weaker PPI figures as a sign of softening demand.
US stocks moved lower after PPI data, with sentiment further pressured by Trump's latest trade threats targeting European imports.
The CME FedWatch tool indicates that markets widely expect the Fed to maintain rates in the March 19 meeting, while rate cut probabilities for May and June continue to rise.
Source: Fxstreet
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