By Felipe Barragán, Expert Research Strategist at Pepperstone
September 11, 2025:
“The dollar held broadly steady on Wednesday, but the release of weaker-than-expected producer price data added a layer of downside risk for the currency. Headline PPI fell 0.1% in August against expectations of a 0.3% rise, the first decline since April. The move was driven by a drop in trade services margins, even as core components excluding food, energy and trade advanced 0.3%. On a year-over-year basis, PPI inflation eased to 2.6%, suggesting that recent price pressures may be more transitory than feared and aligning with recent Fed commentary that tariff-related inflation could prove short-lived, placing further pressure on the greenback.
The weaker inflation data comes on top of last week’s payroll miss and the BLS revision showing 911,000 fewer jobs through March, deepening the perception that the Fed is behind the curve. Futures markets now fully price a 25bp cut next week and assign a 10% chance of a 50bp move. This backdrop could support demand for higher-yielding emerging market currencies such as the Mexican peso, where the rate differential remains attractive.
Political uncertainty persists amid President Trump’s legal battle to remove Fed Governor Lisa Cook, raising renewed concerns about institutional independence and weighing on US assets.
Looking ahead, focus now shifts to Thursday’s CPI release, with headline inflation expected to rise to 0.3% and the core rate to remain steady. Initial jobless claims will be released simultaneously. A softer inflation print would likely validate today’s PPI surprise and intensify selling pressure on the dollar, while firmer data could offer brief relief.”