Dollar near multi-month lows, euro at two-month high as Fed rate-hike bets fade
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The U.S. dollar traded near multi-month lows on Tuesday as traders scaled back expectations of near-term Federal Reserve tightening. The euro traded at $1.1581 after touching a two-month high of $1.1614 on Monday, while sterling stood at $1.3548 just shy of a three-month peak. Bond yields rose after Iran said it would shift to a fully offensive military posture because talks to end the U.S.-Iran war stalled.
Key Facts
- The euro traded at $1.1581 after touching a two-month high of $1.1614 on Monday.
- Sterling traded at $1.3548, just shy of a three-month peak reached in the previous session.
- Traders cut the probability of a Fed rate increase at the September meeting to 35% from 52.2% a week ago, according to CME FedWatch.
- Iran said it would shift to a 'fully offensive' military posture because talks to end the U.S.-Iran war have stalled.
- Brent crude futures rose 0.3% to $91.14 a barrel after hitting their highest since July 30 on Monday.
Currency Moves
The euro fetched $1.1581 in early Asian hours, not far from the two-month high of $1.1614 it touched on Monday. Sterling was at $1.3548, just shy of the three-month peak it touched in the previous session. The yen wavered near 160 per dollar as market focus turned to the Bank of Japan meeting next month.
Fed Rate Bets
U.S. retail sales fell in July for the first time in nine months, following unexpected job losses and mild inflation readings. The run of softer data led investors to scale back expectations of a rate hike by the Federal Reserve. Traders expect a 35% chance of a rate increase at the Fed's September meeting, compared with 52.2% a week ago, according to the CME FedWatch tool. Nohshad Shah, head of EMEA fixed income sales at Citadel Securities, said inflation above target for most of the past five years leaves the inflation process with little to no breathing room.
Bond Yields and Iran
Iran said it would shift to a 'fully offensive' military posture because efforts to negotiate a permanent end to the war with the U.S. have stalled, a senior Iranian official told Reuters. Washington ruled out extending the June ceasefire agreement. Bond yields around the world rose on Tuesday. Brent crude futures were 0.3% higher at $91.14 a barrel after rising to their highest since July 30 on Monday. The yield on the 30-year U.S. bond hovered near its highest level in nearly 20 years, while the 10-year JGB yield hit its highest level since September 1996.
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Dollar near multi-month lows, euro at two-month high as Fed rate-hike bets fade
