US dollar near 2-month low: Here we decode why
What's the story
The US dollar has fallen against major currencies, as investors await key inflation data. The euro edged higher, while sterling was steady near a five-week peak, and the yen held firm, remaining well off the roughly 164 multi-decade low hit late last month. The dollar index, which measures the currency against six major peers, was little changed at 99.6 today. This is just above its lowest level since June 2.
Market response
Futures market reduces chances of September Fed move
The dollar's decline is also due to recent US jobs data, which has cooled expectations for an imminent Federal Reserve rate hike.
This has led to a fall in Treasury yields, further contributing to the dollar's downturn.
The futures market has reduced the chance of a September move by the Fed to around 44%, from 67% a week ago.
Inflation impact
Yu says inflation data will be key for currencies
Geoff Yu, senior EMEA market strategist at BNY, said the weaker US labor market signal has lowered real-rate expectations and extended the dollar decline.
He added that perceptions around US inflation data will likely be the biggest factor for currencies this week.
A consensus estimate calls for core CPI to rise 0.2% month-on-month in July, lifting annual rate to 2.5% and extending a gradual moderation in inflation.
Oil market
Oil prices rise amid Strait of Hormuz reopening uncertainty
In related news, oil prices rose today, with Brent oil futures up 1.4% at roughly $85 per barrel amid continued uncertainty over the reopening of the Strait of Hormuz.
Iran said a deal with Oman defining new shipping lanes was in its final stages but added that the US must still meet other conditions.