The US Dollar is trading slightly weaker today as markets adjust their expectations for Federal Reserve rate hikes. Lee Hardman of MUFG notes that disappointing US housing data has contributed to this shift, though the impact on the Dollar remains limited. The Fed is not heavily focused on housing metrics, prioritizing broader inflation targets instead.
Despite the softer tone, MUFG still anticipates one more Fed rate hike in December, with a slight chance of an additional hike in October following the recent stronger inflation data for September. The scaling back of near-term tightening expectations has temporarily dampened the Dollar’s upward momentum, even as further hikes remain likely.
Meanwhile, rate hike expectations are rising for other G10 central banks, including the Bank of Canada (BoC), Bank of England (BoE), and Reserve Bank of Australia (RBA). This global shift in monetary policy could influence currency markets in the coming months.