The dollar index (DXY00) on Thursday ended the day little changed despite downward pressure from the dovish US PPI report, which lowered the odds of a Fed rate hike in September to 35% from 40% on Wednesday. In addition, the 10-year T-note yield fell -5 bp, undercutting the dollar's interest rate differentials.
The dollar was also undercut by reduced safe-haven demand as there were no overnight reports of new military attacks by the US or Iran in the Persian Gulf. Market concerns about the Middle East were also reduced slightly by news reports saying that the Trump administration is pivoting to using the naval blockade to apply economic pressure on Iran rather than new military attacks. There is no sign of any progress between the US and Iran on an agreement to reopen the Strait of Hormuz, although some ships are still getting through by turning off their transponders and hoping for the best.
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Dollar is Undercut by Dovish US PPI Report
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