Key facts
- The U.S. dollar index hovered near a two-month low as investors awaited inflation data.
- The euro and sterling saw modest gains against the dollar.
- Recent U.S. jobs data has reduced expectations for a Federal Reserve rate hike in September.
- U.S. Treasury yields declined following the weaker jobs report.
- Brent oil futures rose amid uncertainty over the Strait of Hormuz.
The U.S. dollar traded near a two-month low against major currencies on Monday as investors awaited key inflation data for insights into the Federal Reserve's monetary policy path. The euro edged higher to $1.1558, while sterling held steady near a five-week peak at $1.3490. The yen remained firm at 157.90 per dollar.
Recent U.S. jobs data, which showed an unexpected decline in employment in July and downward revisions for prior months, has cooled expectations for a Federal Reserve rate hike in September. The futures market now prices in a 44% chance of a hike, down from 67% a week ago. U.S. Treasury yields fell in response, with the benchmark 10-year note yield last at 4.637%.
Analysts suggest that perceptions around U.S. inflation data will be the biggest factor for currencies this week. Consensus estimates forecast the core Consumer Price Index (CPI) to rise 0.2% month-on-month in July, lifting the annual rate to 2.5%, a continued moderation from 2.6% in June. Producer price data and retail sales figures will further inform the inflation outlook.
Oil prices saw an increase, with Brent crude futures rising 1.4% to approximately $85 per barrel, influenced by ongoing uncertainty regarding the reopening of the Strait of Hormuz. In Asia, the New Zealand and Australian dollars each slipped 0.1%. Market participants are also anticipating the Reserve Bank of Australia's rate decision, with expectations that the key rate will remain at 4.35% for the remainder of the year.