Dollar Slips Amid Rising Hike Bets as Global Tensions Bite
The dollar struggled to maintain its ground on Monday despite an increase in US rate hike bets. The rise in expectations was attributed to the recent blowout US jobs report, which saw traders move to price in a roughly 57% chance of a Federal Reserve hike this month.
However, Middle East tensions raised concerns about broader inflationary pressures that could force global central banks to tighten policy in tandem. This led to a shift in sentiment towards the Japanese yen and worries about US debt and policy uncertainties weighing on the greenback.
The euro was up marginally at $1.1618, while sterling remained little changed at $1.3519. Against a basket of currencies, the dollar fell 0.07% to 99.09, not far from its recent low of 98.558.
Elias Haddad, global head of markets strategy at BBH, noted that a hot CPI print would all but seal a September hike and underpin a firmer US dollar. However, even if a September Fed hike becomes a done deal, the US dollar is unlikely to make new cyclical highs due to tightening by other major central banks limiting policy divergence.