Two of the biggest inflation prints of the cycle landed back to back this week — July CPI on August 12, July PPI on August 13 — and between them they were supposed to settle the question the July NFP miss opened up: is the Fed's hawkish hold from July 29 still defensible, or is September genuinely live for a cut instead of a hike? The honest answer, after both releases, is that the picture got clearer on the surface and messier underneath.
Here's what actually happened in both reports, what it does to the DXY Bias Score, and why the weekly technical setup we flagged going into CPI hasn't actually changed.
July CPI: A Genuine Non-Event
July CPI printed exactly where Dow Jones and FactSet had it: headline +0.1% MoM / 3.4% YoY, core +0.2% MoM / 2.5% YoY. Every one of those four numbers matched consensus. After a spring that saw inflation swing sharply around the Iran-linked energy shock — peaking near 4.2% in May before easing for two straight months — a print with zero surprise in either direction was itself the news.
The detail that mattered most wasn't the headline number, it was what was missing from it. Despite Brent still trading roughly 14% above pre-conflict levels, energy prices in the CPI basket actually fell month-over-month. The inflation pass-through from the oil spike that the market has been bracing for simply hadn't shown up yet.
July PPI: Soft Headline, Hot Core
Then came PPI a day later, and this is where the story split. On the surface, it looked like more of the same relief: final demand PPI was flat (0.0% MoM) against a +0.2% consensus, pulling the annual rate down to 4.7% YoY from 5.5% in June. Energy did the damage again — final demand energy fell 3.1%, with gasoline down 5.7% at the wholesale level, diesel down 6.7%, jet fuel down 15.2%.
But underneath that, the number that actually feeds the Fed's preferred inflation gauge told a different story. Core PPI excluding food, energy, and trade services — the cleanest pipeline signal for where core PCE inflation is headed — jumped to 0.4% MoM, four times June's revised 0.1% pace. The driver was a 6.5% spike in portfolio management fees, a services-side move that has nothing to do with the energy story dragging the headline lower.
| Metric | July actual | Consensus | June (revised) |
|---|---|---|---|
| Headline MoM | 0.0% | +0.2% | −0.1% |
| Headline YoY | 4.7% | 4.9% | 5.5% |
| Core (ex food & energy) MoM | 0.2% | 0.3% | 0.2% |
| Core ex-trade-services MoM | 0.4% | — | 0.1% |
That last row is the one worth sitting with. A soft headline print is the kind of thing that gets a "second straight day of cooling inflation" headline — and technically it is. But the ex-trade-services core is the number that flows most directly into the August 26 core PCE reading, the Fed's actual preferred gauge and the last major data point before the September FOMC. Quadrupling in a single month, on a services-driven spike rather than a one-off distortion, is not a clean dovish signal.
What This Does to the DXY Bias Score
Running both releases through the macro model, the DXY Bias Score sits at −2, Bearish — a step firmer than the −1 weak-Bearish read we had going into CPI. The move isn't being driven by PPI directly (the headline miss on its own doesn't flip much), it's the cumulative weight of the July NFP miss, the in-line-to-soft CPI print, and PPI's soft headline all pointing the same direction, even with the core-services acceleration sitting there as a genuine complication underneath.
−2, Bearish, strengthening conviction. Up from −1 heading into CPI. Driven by the July NFP miss, a CPI print that came in on the soft side of the disinflation trend, and a PPI headline that missed consensus — offset only partially by the hot core-ex-trade-services reading that feeds August 26 core PCE.
The Weekly Technical Picture Hasn't Moved
Here's the part that matters most for anyone actually positioned: the weekly technical alignment we laid out in our correlation check going into CPI is still sitting exactly where it was. DXY weekly is Bearish. EURUSD weekly is Bullish, correlating the way you'd expect against a weak dollar. GBPUSD weekly is still the pair lagging behind the other two — it hasn't flipped to confirm, but it hasn't reversed against the bearish-dollar read either.
| Pair | Weekly direction | Status |
|---|---|---|
| DXY | Bearish | Unchanged since before CPI/PPI |
| EURUSD | Bullish | Correlating with DXY |
| GBPUSD | Lagging | Still not confirming |
What's changed is the conviction behind the bearish-dollar case on the macro side, not the chart itself. Two releases that were each individually capable of forcing a snap-back — a hot CPI or a hot PPI headline — came and went without doing it. That's not the same as a confirmed continuation, but it is one fewer excuse for the dollar bulls to lean on before the next major catalyst.
Why August 26 Core PCE Is Now the Release That Matters
With CPI and PPI both out of the way, the calendar narrows fast. There's no FOMC meeting until September, no NFP until the first week of September, and the next scheduled PPI isn't until September 10. That makes core PCE on August 26 the single most important data point left before the Fed meets — and it's arriving with a specific number already baked into expectations after this week's PPI print: the 6.5% portfolio management spike that drove the ex-trade-services core to 0.4% MoM feeds directly into that release.
If core PCE runs hot in a way that confirms the PPI pipeline signal rather than the soft CPI/PPI headlines, that's the scenario that could finally force GBPUSD's weekly lag to resolve toward a snap-back. If it stays soft, the continuation case — DXY Bearish, EUR and GBP both Bullish, fully aligned — gets its clearest confirmation yet.
What We're Watching Into August 26
- Whether GBPUSD's weekly lag finally resolves. It's been the one pair not confirming the bearish-dollar read since before CPI. Core PCE is a strong enough catalyst to be the trigger either way.
- Whether the core-ex-trade-services acceleration in PPI shows up in core PCE. Portfolio management fees are a volatile, first-month-of-quarter category — it could prove to be noise, or it could be the first sign the disinflation trend is stalling.
- September hike odds on CME FedWatch. They've held roughly steady through both releases in the mid-30s to mid-40s range. A hot core PCE is the kind of surprise that could push them back toward the ~65% level seen right after the July 29 FOMC hold.
Final Thought
CPI and PPI both came in soft on the headline, and both got treated as good news for the dollar bears in the first few hours of trading. But PPI's core-ex-trade-services acceleration is a real complication sitting underneath that headline relief, and it lands directly in the one release — August 26 core PCE — that the Fed actually watches most closely. The weekly technical setup hasn't changed: DXY Bearish, EURUSD Bullish, GBPUSD still lagging. That's the same open setup it was before either release printed. Core PCE on August 26 is now the data point most likely to resolve it.