Dollar's Losses Continue Amid Downgrade in Rate Hike Chances
The US dollar has continued to trade heavily since the release of softer-than-expected data in July, including the loss of jobs and decline in retail sales. This led the market to downgrade the chances of a rate hike next month from around 70% at the end of July to about 30%. The stabilization of price pressures and decline in retail sales have been key factors influencing the dollar's broad performance.
The dollar has been oversold technically, with momentum indicators stretched. However, it may still experience a 'turnaround Tuesday' as prices set up for a potential turnaround. Japan and China reported disappointing data, with Japanese private consumption flat in Q2 and capex falling by 1.2%. China's July macro data were also weaker than expected following the disappointing Q2 growth.
The Canadian negotiators have about 36 hours to strike a deal with the US to avoid a 50% tariff on around $20 bln of goods shipped to the US. The dollar has been confined to a range of ~JPY158.85-159.40, inside last Friday's range.