US Dollar Weakens Amid Easing Inflation Fears and Ongoing Fed Uncertainty

US Dollar strength has been tempered due to uncertainty surrounding the Federal Reserve's upcoming policy meeting.

MUFG's Lee Hardman notes that the US Dollar has softened as Middle East tensions ease and Brent Oil retreats below $90, reducing energy-driven inflation fears.

The correction in energy prices has slightly lowered market-implied odds of a near-term Fed rate hike. Despite this, MUFG still expects the Fed to keep rates on hold this week but does not fully rule out a hike.

In the short term, the correction lower in energy prices will dampen rate hike expectations for central banks ahead of the Fed's policy meeting this week.