Dollar Index Stabilizes Despite Fading Rate Hike Odds

The US Dollar Index (DXY) has begun to stabilize after experiencing losses over the past three days, trading around 99.60 during Asian hours on Tuesday.

This is despite a decline in expectations for a Federal Reserve interest rate hike next month, which have dropped to 35% from 47% just last month, according to the CME FedWatch Tool.

Scotiabank strategists note that 'soft US data reports are dampening Fed tightening expectations' and argue that 'the 25bps of tightening still priced in by year-end is too much from our perspective.' They also highlight 'clear signs of market angst about US fiscal dynamics,' reflected in the steepening US yield curve.