US Dollar Weakens Following PPI Data Release; British Pound Climbs to Two-Month High

The Bloomberg Dollar Index declined in New York trading on Wednesday after data showed US core producer inflation for June came in below expectations. The British pound rose to a two-month peak, leading gains among G10 currencies against the dollar, following reports that incoming UK Prime Minister Andy Burnham will appoint Shabana Mahmood as Chancellor of the Exchequer.

The dollar spot index fell 0.2%, having dropped 0.4% the previous day.

The US Producer Price Index for final demand decreased 0.3% month-over-month in June, against a median economist forecast of no change. The year-over-year rate slowed to 5.5%, compared to a forecast of 6.2%.

US Treasury yields moved lower across the curve; the 2-year yield fell approximately 5 basis points to 4.14%.

In remarks before a Senate committee on Wednesday, Federal Reserve Chair Kevin Warsh stated that price increases stemming from artificial intelligence infrastructure development do not necessarily fuel inflation.

In other developments, US President Donald Trump vowed to intensify bombing against Iran until it ceases attacks on vessels in the Strait of Hormuz and agrees to open the waterway.

The pound surged as much as 1.1% against the dollar to an intraday high of 1.3542, its strongest level since May 13. This move followed news that incoming Prime Minister Andy Burnham will appoint current Home Secretary Shabana Mahmood as Chancellor.

The Canadian dollar gained 0.1% to 1.4045 per US dollar, as the Bank of Canada, in line with widespread expectations from economists and swap traders, left its policy rate unchanged for a sixth consecutive meeting.

"After a year of weakness, the Canadian economy is showing signs of recovery," the Bank of Canada stated in its Monetary Policy Report.

Swap market pricing implies roughly 17 basis points of tightening by December. The yield on the 2-year Canadian government bond fell 5 basis points to 2.82%.

The euro advanced 0.3% against the dollar to 1.1449.

Bank of Italy Governor Fabio Panetta remarked that European Central Bank policy must remain sufficiently restrictive to keep inflation expectations anchored, even amid uncertain geopolitical conditions.

The yen edged higher versus the dollar, with the dollar trading at 162.12 yen.