US Dollar Faces Challenges as Soft Data Weighs on Resilience

The US Dollar (USD) has been facing challenges due to softer economic data and lower short-term Treasury yields, despite holding above its 200-day moving average near 99.200.

According to MUFG's Derek Halpenny and Lee Hardman, the weakening of US data, including retail sales, Nonfarm Payrolls (NFP), and Consumer Price Index (CPI), is undermining USD support.

The analysts note that reduced Federal Reserve (Fed) hike pricing has also contributed to the decline in Dollar strength. On July 24th, the US rates market was pricing in around 57bps of Fed hikes by April next year, including a hike in September.

Halpenny and Hardman expect the Dollar to weaken modestly heading into next year due to these developments.