Dollar Weakens as Rate Hike Expectations Slide

The US dollar has been experiencing losses in recent times due to expectations of a less restrictive monetary policy. The latest economic data releases have weakened interest rate hike bets, with consumer price inflation matching forecasts and producer prices below expectations.

Last week's retail sales fell by 0.6%, against a forecast of a 0.1% increase, while consumer sentiment deteriorated more than anticipated. This has led to a shift in market expectations, with a 70% probability now priced in for interest rates to remain unchanged at the Federal Reserve's next meeting, up from 48% a week earlier.

However, some analysts believe that the downside could be limited due to elevated yields and persistent inflation concerns. Escalation of tensions in the Middle East or increased oil prices could also revive demand for safe-havens, supporting the dollar.