Markets reduce bets on a Fed rate hike next month, pressuring the dollar before key inflation data.
The US Dollar has underperformed among G10 currencies as investors scale back expectations for a September Federal Reserve rate hike. BNY’s iFlow metrics show USD as the weakest performer, driven by softer employment data and lower tightening odds.
Recent market positioning reflects diminished confidence in further Fed action, with reduced hike probabilities weighing on the currency. The upcoming Consumer Price Index report introduces asymmetry, as a strong print could reverse recent repricing, while a soft or in-line reading may reinforce bearish sentiment.
Institutional flows suggest continued USD outflows if inflation data fails to surprise to the upside, maintaining pressure on the currency.