Dollar's Slight Recovery Fades as Traders Price Out Rate Hike Bets

The US Dollar Index (DXY) has experienced a slight recovery to around 99.70 after a significant decline on Friday, but traders remain cautious about its prospects.

Following the release of weak US Nonfarm Payrolls (NFP) data for July, investors have priced out the possibility of a Federal Reserve interest rate hike in the September policy meeting.

Strategists at ING reiterate that their long-held call for no further Fed hikes this year was always going to be stress-tested into the 16 September FOMC. They note that the weak NFP data, which included a -20k payroll print and over 100k of downward revisions, has reinforced their dovish Fed call and bearish bias on the dollar.

Investors await the US Consumer Price Index (CPI) data for July, to be released on Wednesday, which is expected to provide another dovish signal for the Fed. The CPI data could support further dovish repricing of Fed expectations and remain consistent with ING's bearish stance on the Dollar.