Dollar Tumbles as Fed Rate Hike Expectations Plummet to 30% Probability

The Federal Reserve's rate hike expectations have cooled down, leading to a three-day decline in the U.S. dollar and its lowest level since May.

The Bloomberg Dollar Spot Index fell for the third consecutive trading day on August 17, hitting its lowest level since May 15.

This downward trend is attributed to the release of weak U.S. economic data over the past two weeks, which has shattered market confidence in continued rate hikes by the Federal Reserve.

On July 7, non-farm payrolls decreased by 23,000, contrary to expectations of an 80,000 increase, and inflation figures have returned to a downward trajectory.

The cumulative effect of these data releases was immediate, with the market-implied probability of a Federal Reserve rate hike in September dropping from approximately 75% in late July to 30%.