Dollar Under Pressure as Rate Hike Expectations Moderate

The U.S. Dollar Index has been trading weakly around 99.50 in the Asian session, and market expectations for Federal Reserve rate hikes are moderating.

Following an unexpected decline in U.S. retail sales and recent inflation data showing a cooling trend, markets have recalibrated their expectations for the Federal Reserve's monetary policy, leading to a weakening of the dollar's rebound momentum.

The market narrative has shifted from 'whether the Fed will continue tightening' to 'whether a slowdown in the U.S. economy will prompt a more dovish policy stance.'

The probability of a September rate hike is now around 31%, and the likelihood of a December hike is about 69%.