US dollar declines as Fed hike bets fade and trade deficit widens

The US dollar faced a setback as investor enthusiasm for Federal Reserve rate hikes cooled. A disappointing payrolls report and a slight dip in the ISM services index contributed to the retreat, pulling the dollar index down from its recent peak. Treasury yields also eased slightly, though they remain high, while trade data revealed a record surge in imports, widening the deficit to $105.6 billion.

The euro strengthened against the dollar, with expectations of an European Central Bank rate hike in December rising to 80%. French bond yields dropped as stress in the bond market eased. The combination of softer economic data and shifting market expectations weighed on the dollar's momentum.