US Dollar Mixed as Producer Prices Flat and Rate Hike Bets Cool

The US dollar traded in mixed territory on 13 August 2026 after July producer prices remained unchanged, prompting traders to reduce their bets on a September Federal Reserve interest rate hike. The flat Producer Price Index for final demand followed a revised 0.1% drop in June and missed the 0.2% forecast from economists polled by Reuters.

The probability of a September rate hike fell to 35%, down from 40% on Wednesday and 55% a week earlier. This shift in sentiment came after Wednesday’s consumer price inflation report showed that US consumer prices barely increased last month, reinforcing signals that inflation remains sticky but not accelerating.

Noel Dixon, senior macro strategist at State Street, noted that the components of Thursday’s report feeding into the personal consumption expenditures data due later in the month suggest the upcoming inflation print "should be pretty good." Dixon added that the latest producer and consumer price data helps make the case for the Fed staying on hold in September.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.02% to 99.96, after earlier falling to 99.80 in the immediate aftermath of the PPI report. The euro gained 0.03% to $1.1528, while the pound weakened 0.08% to $1.3481.

Oil prices pared losses to less than 1% after dropping more than 3% earlier in the session, as reports that Yemen's Houthis had targeted a Saudi Aramco refinery with drones renewed concerns over supply disruptions in an already tight global market. Traders continue to weigh whether the Fed will need to raise rates as inflation remains above the central bank's 2% target and oil prices climb amid Iran-related disruptions in the Strait of Hormuz.

Other economic data on Thursday showed that the number of Americans filing claims for unemployment benefits increased moderately last week, suggesting that the labour market remains stable despite July's surprise job losses. Retail sales data on Friday will serve as the next test of US economic strength.

The Japanese yen weakened 0.04% to 159.48 per dollar, giving back some of the gains from last month's historic joint intervention by the US and Japan. Dixon remarked that investors are not scared away from continuing to fade the yen unless the Bank of Japan delivers in September with an increase in hawkish guidance.

The Norwegian crown weakened after Norges Bank left interest rates unchanged, as expected, while flagging that inflation had softened recently. At 4.25%, Norway holds one of the highest interest rates among the 10 most developed economies, and its status as an oil and gas exporter has given the crown a boost this year. Against the Norwegian crown, the dollar strengthened 0.24% to 9.51.

The UK economy unexpectedly grew in June, attributed to a dip in energy prices, the start of the men's soccer World Cup, and hot weather.