US Dollar Index (DXY) retreats below 98.00 ahead of the Trump-Putin meeting

• The Dollar pares gains on Friday amid hopes of some progress towards a peace agreement in Ukraine.
• The moderate risk appetite ahead of the Trump-Putin meeting is weighing on the USD.
• Later today, US Retail Sales and Univ. Michigan Consumer Inflation Expectations might set the USD's near-term direction.

The US Dollar remains trading within a descending channel. The bullish reaction to the stronger-than-expected PPI figures seen on Thursday was capped at the top of the channel, around 98.35, and the index has given away practically all post-PPI gains on Friday, returning to levels below 98.00.

A moderate risk appetite, on hopes that the Trump-Putin meeting due later today in Alaska will deliver some advance towards the end of the Ukrainian war, is supporting the Euro and increasing pressure on the US Dollar.

The Dollar pulls back after the PPI shock

On Thursday, US wholesale prices showed their largest increment in the last three years, confirming that the higher tariffs are starting to hit inflation. The figures cooled some of the hopes for immediate Fed cuts triggered by the benign CPI figures seen earlier on the week, and sent the US Dollar higher across the board.

As the dust from the PPI shock settles, and investors realise that futures markets are still pricing more than 90% chances of a 25 bps rate cut in September, bearish pressure has returned to the US Dollar.

In the calendar today, US Retail Sales will provide further insight about the impact of tariffs on consumer spending, which, together with the University of Michigan Consumer Inflation Expectations, is likely to set the tone for the US Dollar.