Dollar Fails to Rally on Rate Hike Expectations Amid Global Central Bank Tightening
The US dollar was unable to capitalize on increased expectations of a rate hike by the Federal Reserve despite a strong jobs report last week. The greenback struggled to maintain its brief gains and remained flat at 99.16 against a basket of currencies, not far from its recent low of 98.558.
Market participants are now pricing in a roughly 57% chance of a rate hike this month, with much depending on Friday's inflation data. A hot CPI print would seal a September hike and underpin a firmer US dollar, while a cooler reading would strengthen the case for a hold and leave the dollar vulnerable to a dovish Fed repricing.
The European Central Bank is expected to lift rates to 2.75% on Thursday, with futures implying a 75% chance of another hike to 3.0% by December. Similarly, markets are pricing in a 75% chance of a rate hike by the Bank of Japan at its meeting on September 18.
The yen rose 0.1% to 156.01 per dollar on Monday, drawing additional support after Japanese Prime Minister Sanae Takaichi's economic adviser projected a BOJ hike this month.