The dollar index (DXY00) is up +0.26% as the strong US PPI report sparked a pull-back in expectations for Fed rate cuts in the coming months. In addition, San Francisco Fed President Mary Daly and St Louis Fed President Alberto Musalem today both threw cold water on the idea of a -50 bp rate cut at the September FOMC meeting. The dollar's interest rate differential improved with the 10-year T-note yield today up +3 bp and the 2-year T-note yield up +5 bp.
Today's PPI report was much stronger than market expectations. The PPI report suggested that the markets might have been overly optimistic about Tuesday's CPI report and that companies are passing through tariffs at the wholesale level at a higher pace than earlier thought.
