Fed Hike Uncertainty Weighs on Dollar Outlook

The Federal Reserve's decision to raise interest rates this year is far from certain. According to think.ing.com, there's only a narrow path for the Fed to avoid hiking rates. To achieve this, softer US CPI readings in July and August would be crucial, followed by market pricing that gives a 30% chance or less of a rate hike on decision day.

The ECB is also expected to raise interest rates to 2.50% in September, with any further hikes deemed unnecessary. The European Central Bank may even cut back to 2.25% next summer due to drought conditions weighing on economic activity.

If the Fed does manage to avoid hiking rates, the dollar could weaken as a result. However, this scenario is highly dependent on the US CPI readings and market expectations.