The dollar index slid to its lowest level in more than two months as a string of weaker-than-expected US economic data continued to erode expectations for further Federal Reserve tightening.
The dollar index fell around 0.18% to a fresh 2.25-month low, extending losses from the prior week as traders continued digesting July’s soft retail sales figures alongside weaker employment gains, downward revisions to prior months’ job data, and milder-than-expected inflation readings. Taken together, the run of data has meaningfully dialed back the case for additional Fed tightening in the near term.
The move pushed the dollar to a fresh multi-month low against a broad basket of currencies, with the euro benefiting most directly from the shift in rate expectations. The decline marks a continuation of the trend that began with the disappointing CPI and PPI readings earlier in the month, suggesting the market has settled into a clearer dovish lean heading into the Fed’s next policy meeting.
With the run of soft data now spanning inflation, employment, and consumer spending simultaneously, traders are increasingly treating a near-term Fed hike as unlikely, shifting focus instead to how much further easing the central bank might eventually signal if the trend continues into the autumn data releases.
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