FX.co ★ Dollar Holds Steady as Oil Slump Reduces Fed Rate Hike Bets

The dollar index hovered near 100 on Tuesday, while US Treasury yields fell as oil prices slumped amid growing optimism that diplomacy could defuse the US-Iran conflict. This shift in sentiment led investors to scale back expectations for a Federal Reserve interest rate hike in September. Qatar said mediators were making progress in negotiations, and Treasury Secretary Scott Bessent indicated that an agreement to reopen the Strait of Hormuz could come as soon as Tuesday or Wednesday.

At the same time, investors weighed a new set of US economic indicators. Job openings dropped more than expected to 7.36 million in June, the trade deficit narrowed as imports declined more sharply than exports, and factory orders unexpectedly fell 0.3%, marking a second straight monthly decline. These developments reduced the implied probability of a September Fed rate increase to 57%. Markets now look ahead to the ADP employment report and Friday’s nonfarm payrolls for further signals on the Fed’s policy path.