US producer prices jump

Daily Currency Update

USD - United States DollarThe US dollar modestly strengthened against a basket of currencies after data showed that US producers hiked their prices again in July. US jobless claims also dipped for a third straight week. The US Dollar Index was up 0.10%, trading at 93.01 at the time of writing. The Producer Price Index (PPI) tracks what firms charge for their goods and services. Last month’s reading climbed 1%. On an annual basis, the PPI jumped to a record high of 7.8%. Analysts suggest that these producer prices could feed into higher costs in retail stores, where annual consumer price inflation remained at a 13-year high of 5.4% in July.This pours water on the argument that inflation is still a concern in the US, and that the Federal Reserve needs to move to tighten their monetary policy to counteract the impact of inflation. What's uncertain is the timing behind when this will begin. Federal Reserve members are split over when the tapering should begin, with some citing an immediate start and others suggesting that the central bank should wait until October. This uncertainty could cause some volatility for the US dollar in the coming weeks.