The US dollar fell to a three-month low as investors reduced bets on Federal Reserve interest rate hikes

The US dollar has fallen to a three-month low, as a series of weak US economic data led investors to lower their expectations for further interest rate hikes by the Federal Reserve. The dollar spot index has declined for the third consecutive trading day, reaching its lowest level since May 15. Currently, the market reflects a one-third probability of a rate hike by the Federal Reserve next month, down from about 75% at the end of July. Previously, the US reported disappointing employment data for July, moderate inflation, and unexpectedly weak retail sales figures. This week, there are few significant data points that could trigger a substantial breakthrough for the dollar, with Friday's global purchasing managers' index potentially being the next substantial test. Elias Haddad, Global Head of Market Strategy at Brown Brothers Harriman, stated that if US economic data improves and solidifies the country's growth advantage, it could boost the dollar. However, the market currently expects only about a 36 basis point increase in this tightening cycle, and the options market indicates that the dollar will face greater pressure in the short term. One-month options have turned bearish on the dollar for the first time since the end of February, while longer-term options remain bullish