Forex
US Dollar's Upside Limited as Fed Hike Expectations Dwindle
The US Dollar's upside has been limited due to softer US Producer Price Index (PPI) and lower US Treasury yields, leading markets to scale back expectations of a September Federal Reserve hike.
This has resulted in a reduced probability of a rate hike next month, down from about 55% before last week's labour market report. Markets now price around a 35% probability of a rate hike in September.
Crude Oil remains in the USD80s, and a constructive risk backdrop supports carry trades, despite ongoing oil market volatility and persistent FX intervention risks for JPY.