US producer prices were unexpectedly unchanged in June as an increase in the cost of goods because of tariffs on imports was offset by weakness in services.

Tuesday’s release showed US consumer prices increased by the most in five months in June amid higher costs for some goods, suggesting US President Donald Trump’s tariffs were starting to have an impact on inflation.

“Yesterday's reaction to the inflation data was very positive for the US Dollar overall,” said Eric Theoret, FX Strategist at Scotiabank in Toronto. “We're seeing an extension of the month-to-date move.”

Fed funds futures traders are now pricing in 44 basis points of cuts by year-end, little changed after Wednesday’s data but down from around 48 basis points before Tuesday’s consumer price data.

The Dollar is also likely benefiting from traders that have been short the currency having to exit or cover positions as it rebounds from its recent lows.

“This is a market where you've got sentiment and positioning leaning pretty hard the other way, so I think from that perspective, it's also a bit vulnerable,” said Theoret.

The euro was last down 0.23% on the day at $1.1572, the lowest since June 23. Against the Japanese Yen, the dollar weakened 0.03% to 148.81. It earlier reached 149.18 yen, the highest since April 3.

Sterling fell 0.04% to $1.3373 and reached $1.3361, the lowest since May 20.

--Reuters--