Dollar Slips as Inflation Expectations Shift Amid Trade Talk Idle

The dollar slid amid signals of reduced inflation and stalled trade tariffs. Producer price data indicated potential lower core PCE inflation, influencing forex and rate cuts. Trump's potential reciprocal tariffs impacted market sentiment, while geopolitical optimism over Russia-Ukraine talks boosted European currencies. The dollar's overarching trend remains upward.

The dollar experienced a decline on Thursday, following January's producer price report that hinted at a potential easing of inflation pressures. This dip continued after the White House stated that reciprocal tariffs on other countries would not be immediately enforced.

The producer price data suggested that core PCE inflation, favored by the Federal Reserve, might be lower than earlier projections for January, despite an unexpected rise in producer prices. This announcement comes after the Consumer Price Index for January surpassed expectations, causing traders to predict fewer rate cuts this year.

President Donald Trump's declaration of reciprocal tariffs on countries imposing duties on U.S. imports initially posed concerns but did not take immediate effect. The announcement appeared to be a strategic move to initiate trade discussions. Additionally, the market exhibited optimism regarding potential peace negotiations between Russia and Ukraine, strengthening European currencies.

(With inputs from agencies.)