DXY Steadies Near 98.55 as Markets Eye PPI After Tariff-Driven CPI Rebound

DXY Steadies Near 98.55 as Markets Eye PPI After Tariff-Driven CPI Rebound

The US Dollar Index (DXY) remained resilient around the 98.55 level on Wednesday as bullish momentum extended, fueled by shifting inflation expectations and easing bets on imminent Federal Reserve rate cuts.

The USD outperformed major peers like the JPY, EUR, CHF, and PHP, showing strength in the face of soft core CPI data that initially triggered a dip but quickly reversed once traders examined the inflation report in more detail.

US CPI Details Reveal Tariff Effects on Consumer Prices

While the headline CPI was in line with expectations, the core CPI print for June appeared softer at first glance. However, a closer look revealed an important shift:

"Several tariff-sensitive items—apparel, auto parts, recreational goods, and household furnishings—showed notable price increases," analysts noted.

This suggests that President Trump’s reintroduced tariffs are beginning to seep into the consumer side, hinting at upside risks to inflation in the coming months and affecting key metrics like core PCE, the Fed’s preferred inflation gauge.

Empire Manufacturing Adds to USD Support

Adding to the bullish USD sentiment, the Empire Manufacturing Index came in significantly above expectations:

• Actual: 5.5
• Expected: -9.2

This broad strength across manufacturing is seen as another factor that lowers the urgency for rate cuts by the Fed.

What’s Next? US PPI in Focus

Markets now turn their attention to the US Producer Price Index (PPI) release later today. The data will help determine whether producer-level inflation supports the upward trend seen in consumer prices, offering further evidence on the extent of tariff passthrough.

A hotter-than-expected PPI print could reinforce current hawkish expectations and further boost the US Dollar.

Related Reading on Tredu.com:

• US CPI Shows Tariff Impact as Core Goods Inflation Rises
• Will PPI Confirm Sticky Inflation? What to Watch
• DXY Technical Outlook: Resistance Zones to Watch Above 99.00