The US producer price report shows that after inflationary pressure increased and oil prices rose, the US dollar strengthened sharply. Both factors have boosted market expectations for the Fed to raise interest rates this year. The Bloomberg Dollar Spot Index rose 0.4% on Thursday, the biggest intraday gain since August 28. According to data released by the US Bureau of Labor Statistics on Thursday, the core producer price index, which excludes food and energy, rose 0.2% last month, and rose 0.3% after the July data was revised. Overall PPI rose 5.4% year on year, the biggest increase in three months. Driven by rising energy prices, energy prices showed no signs of falling. Brent crude oil surged to $105 a barrel on Thursday as the US-Iran conflict continued to escalate. US Treasury yields are rising, while global yields are rising at the same time. Mark McCormick, chief foreign exchange strategist at the Bank of Montreal, said that higher oil prices indicate that “inflationary pressure will continue in the coming months.” He said that the market underestimated the level of inflation and its impact on interest rates, the strength of the US dollar, and investors' risk appetite. “The mainstream view in the market this summer is that the economy is a soft landing, and risk appetite remains optimistic. Once market sentiment worsens due to the relevant statements of the Federal Reserve, the US dollar will strengthen further, and the financial environment is likely to tighten in the fall.”

The US producer price report shows that after inflationary pressure increased and oil prices rose, the US dollar strengthened sharply. Both factors have boosted market expectations for the Fed to raise interest rates this year. The Bloomberg Dollar Spot Index rose 0.4% on Thursday, the biggest intraday gain since August 28. According to data released by the US Bureau of Labor Statistics on Thursday, the core producer price index, which excludes food and energy, rose 0.2% last month, and rose 0.3% after the July data was revised. Overall PPI rose 5.4% year on year, the biggest increase in three months. Driven by rising energy prices, energy prices showed no signs of falling. Brent crude oil surged to $105 a barrel on Thursday as the US-Iran conflict continued to escalate. US Treasury yields are rising, while global yields are rising at the same time. Mark McCormick, chief foreign exchange strategist at the Bank of Montreal, said that higher oil prices indicate that “inflationary pressure will continue in the coming months.” He said that the market underestimated the level of inflation and its impact on interest rates, the strength of the US dollar, and investors' risk appetite. “The mainstream view in the market this summer is that the economy is a soft landing, and risk appetite remains optimistic. Once market sentiment worsens due to the relevant statements of the Federal Reserve, the US dollar will strengthen further, and the financial environment is likely to tighten in the fall.”