Falling US yields and weaker labor data reduce expectations for further Federal Reserve tightening, pressuring the dollar index.
The US dollar traded lower as investors scaled back Federal Reserve rate hike expectations following softer labor data and a mixed US Producer Price Index report. Short-term US yields declined, though the dollar index remained above its 200-day moving average near 99.200.
Recent data showed a slowdown in private employment and wage growth, with limited evidence of energy price pressures spilling into core inflation. This has given the Fed more room to pause rate hikes, reducing the focus on July’s upside inflation surprise.
While the dollar has faced headwinds from falling yields this month, the decline has not yet triggered a deeper sell-off after last month’s pullback.