Dollar Plunges to 10-Week Low Amid Reduced Fed Hike Bets

The US dollar began the new trading week on the back foot, extending its decline from Friday's session. The greenback fell to a 10-week low against a basket of currencies as investors reassessed their expectations for a Federal Reserve interest rate hike in September.

A weaker-than-expected retail sales report and a sharp drop in July payrolls led to a slashing of Fed hike bets, with the probability of a September increase now standing at just over 30%. The core control group measure contracted for the first time since September 2025, indicating that sticky inflation is taking a toll on consumption.

The dollar's decline was also fueled by fresh concerns about the Fed's independence, amid reports of regular contact between President Trump and Fed Chair Kevin Warsh. Additionally, the soaring budget deficit has pushed up yields in Treasury auctions, further weighing on the greenback.