The U.S. dollar index was down 0.1% to 99.94

The U.S. dollar slid on Thursday, as central bank rate hike expectations took another hit from softer-than-expected producer inflation data.

At 19:39 GMT, the U.S. dollar index was down 0.1% to 99.94. The gauge was on track to snap a three-day win streak.

A day after an in-line July consumer inflation report, investors were focused on producer price readings for the same period.

According to the Bureau of Labor Statistics, the headline July producer price index (PPI) was flat on a M/M basis, while ticking up 4.7% Y/Y. In June, headline PPI had slid 0.1% M/M and jumped 5.5% Y/Y. The July readings were softer than economists’ expectations.

Meanwhile, July core PPI gained 0.2% M/M and 4.2% Y/Y, against estimates of 0.3% and 4.2%, respectively. In June, core PPI had added 0.4% M/M and 4.7% Y/Y.

With both reports in hand, headline and core CPI and PPI have now moderated on a Y/Y basis. Both indicators are widely followed, but the central bank prefers to track the core personal consumption expenditures (PCE) price index to gauge inflation. Components from CPI and PPI feed into the PCE.

Currency market participants reacted to the data by reducing their expectations for central bank rate hikes. As per the CME FedWatch tool, the odds of a September rate hike slid to around 34% after PPI, while the odds of the bank holding rates steady increased to almost 66%.

Rate-sensitive assets also reacted accordingly, with U.S. Treasury yields declining as bonds were snapped up. The benchmark longer-end 10-year yield was last down 6.1 basis points to 4.631%, while the shorter-end 2-year yield slid 5.4 basis points to 4.145%. Technology stocks got a lift, with the S&P 500 tech sector last up 1.1%.

Softening price pressures have quelled rate-hike fears in the past two sessions, with Fed watchers yesterday delaying the projected start of the central bank’s tightening from September to October and then extending it today to December, José Torres, senior economist at Interactive Brokers, said.

Separately, initial claims for state unemployment benefits rose 9k to a seasonally adjusted 209k for the week ended August 8, the Labor Department said on Thursday. Economists had expected 202k claims.