FX.co ★ Dollar Weakens on Easing Fed Hike Bets

The dollar index hovered around 99.5 on Tuesday, trading near a two-month low as investors further dialed back expectations of a Federal Reserve rate hike this year following a series of weaker-than-expected US economic reports. Data released last week showed declines in both US retail sales and consumer sentiment, while inflation readings remained subdued. Markets now anticipate the Fed will leave policy unchanged in September and are no longer fully pricing in a rate increase before year-end, in contrast to sentiment just a week earlier. Investors are also awaiting the minutes from the Fed’s July meeting and Chairman Kevin Warsh’s remarks at the annual Jackson Hole symposium for additional guidance on the policy outlook. At the same time, traders stayed alert to potential inflation risks as hopes faded for a new agreement between the US and Iran, after President Donald Trump signaled he was not interested in extending the existing interim peace deal.