Recent US economic data misses and lower Treasury yields reduce expectations for Federal Reserve rate hikes, pressuring the dollar.
The US dollar faces downward pressure as weaker retail sales, Nonfarm Payrolls, and Consumer Price Index data reduce support. Markets have scaled back Federal Reserve rate hike expectations, with only 57bps of hikes priced in by April next year, down from earlier forecasts.
The US Dollar Index remains above its 200-day moving average near 99.200 but has yet to test this support level. A steeper yield curve, driven by falling short-term Treasury yields, has created an unfavorable backdrop for the dollar, though it has not yet triggered a significant decline.
Analysts expect the dollar to weaken modestly into next year as softer economic data continues to weigh on Fed policy expectations. The shift in rate hike pricing reflects growing skepticism about further tightening amid cooling inflation and labor market trends.