Weaker US inflation and jobs data reduce expectations for near-term Federal Reserve tightening, pressuring the USD.
The US Dollar Index (DXY) retreated in early Asian trading Thursday, failing to sustain gains above the 100.00 level. The pullback follows Wednesday’s softer-than-expected US Consumer Price Index (CPI) data for July, which showed continued inflation moderation.
The index remains trapped in a two-week range, with traders paring back Federal Reserve rate hike bets after last week’s disappointing Nonfarm Payrolls report. Despite the dovish shift, geopolitical tensions, including US-Iran standoffs over the Strait of Hormuz, keep some Fed tightening prospects alive.
Markets now await the US Producer Price Index (PPI) release and comments from Federal Open Market Committee (FOMC) members for further direction. The mixed backdrop suggests caution for aggressive USD shorts.