Dollar Weakness Mounts Amid Reduced Rate Hike Bets and Middle East Tensions

The US dollar remained near multi-month lows against its peers as traders reduced their bets on rate hikes. The euro eased away from two-month highs of $1.161, while sterling dipped 0.1% to $1.352.

Data in the past few weeks has pointed to a softer US economy, including unexpected job losses last month and mild inflation readings. Investors are scaling back expectations of a rate hike by the US Federal Reserve, with the CME FedWatch tool showing a 35% chance of a rate increase at the September meeting.

The ongoing conflict in the Middle East has stoked inflationary concerns and upended the global interest rate outlook. The Strait of Hormuz remains effectively shut, and traders are focused on the threat of more intervention as well as the Bank of Japan meeting next month.