Key facts
- The U.S. dollar traded range-bound against major currencies.
- Softer economic data, including unexpected job losses and mild inflation, has led markets to scale back expectations of a Federal Reserve interest rate hike.
- Market pricing now indicates a nearly 70% chance of the Fed holding rates steady in September.
- The euro eased from recent highs, while sterling and the yen weakened against the dollar.
- Global bond yields rose, with U.S. 30-year Treasury yields reaching their highest level since 2007.
The U.S. dollar traded range-bound against major peers on Tuesday as markets continued to price in a dovish response from the Federal Reserve following softer economic data. Unexpected job losses and mild inflation readings have led investors to scale back expectations of an interest rate hike by the U.S. central bank.
Market pricing for a September quarter-point hike flipped toward a near 70% chance of a hold, after recent economic data. Eugene Epstein, head of structured products for Moneycorp North America, noted that current dollar levels reflect a surprised dovishness from the last Fed meeting, compounded by inflation data that did not imply rising prices.
Analysts at Scotiabank, led by Shaun Osborne, stated that benign inflation and signs of softness in the U.S. labor market make a September Fed hike highly unlikely, viewing short-term USD gains as a fade. The dollar was 0.17% higher against the Swiss franc at 0.81230, while sterling was down 0.04% against the dollar at $1.35356. The Japanese yen was 0.08% weaker at 159.605 per dollar.
Concerns about the impact on energy prices from a prolonged closure of the Strait of Hormuz contributed to rising bond yields globally. U.S. 30-year Treasury yields rose to their highest level since 2007. Brent crude futures held steady to settle at $91.02 a barrel.