Dollar Slumps on Reduced Rate Hike Bets, Iran War Fears

The US dollar has lost ground against major currencies as investors have reduced their expectations of near-term monetary tightening. The euro reached $1.1581, just shy of its two-month high of $1.1614, while sterling traded at $1.3548, close to its three-month peak.

Data from last week showed that US retail sales fell in July for the first time in nine months, following unexpected job losses and mild inflation readings. This has led investors to scale back expectations of a rate hike by the US Federal Reserve, with traders now anticipating only a 35% chance of a rate increase at the Fed's September meeting.

The Strait of Hormuz remains closed, and an impasse in talks to end the US-Iran conflict is fueling concerns about inflation. Bond yields are rising as traders remain wary of elevated oil prices and their impact on the global economy.