US Dollar declined on rate cut hopes

The US Dollar retreated across the board as the softer-than-expected US economic data kept the case for a September Federal Reserve interest rate cut intact, amid rising concerns about the health of the world’s biggest economy.

The greenback ended last week 0.5% lower against a basket of currencies as the traders increased their bets not only for a September cut, the first this year, but by another rate cut before year-end.

Money markets reflect an 84% chance of a 25-basis-point Fed rate cut in September, and another in December, according to CME FedWatch,

(Source: www.cmegroup.com)

Following the latest bearish developments, the Dollar weakened to $1.17 against the Euro, to $1.35 against the Pound Sterling, while it held at ¥147.50 versus the Japanese Yen.

However, the dollar found little support on last Friday from data that showed U.S. retail sales increased solidly in July, as well as the U.S. import prices rebounded in July, boosted by higher costs for consumer goods.

Traders also await this week’s Unemployment Claims, and Jackson Hole symposium for clues on the Fed’s next move.

Signs of weakness in the U.S. labour market combined with any inflation from trade tariffs could present a dilemma for the Fed’s rate cut trajectory.

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