US Dollar Near Two-Month Low as Markets Await Inflation Data

The U.S. dollar traded near a two-month low against major currencies on Monday as investors turned their attention to upcoming U.S. inflation data for fresh signals on the Federal Reserve’s interest rate outlook.

The euro strengthened to around $1.1558, remaining close to its highest level since mid-June. The British pound held near $1.3490, close to a five-week high. Meanwhile, the Japanese yen traded around 157.90 per dollar after surrendering part of its recent intervention-driven gains. It remained considerably stronger than the multi-decade low of roughly 164 reached late last month.

The U.S. Dollar Index, which measures the greenback against six major currencies, was little changed at approximately 99.6 and remained near its weakest level since June 2.

Pressure on the dollar increased after Friday’s U.S. employment report showed an unexpected decline in jobs during July, while employment gains for the previous two months were revised substantially lower. The weaker labor market reduced expectations that the Federal Reserve will raise interest rates in September.

U.S. Treasury yields also declined following the jobs data, with the benchmark 10-year Treasury yield around 4.637%. Futures markets now price the probability of a September Fed move at roughly 44%, down from 67% a week earlier.

Investors are now focused on U.S. consumer price index data. Economists expect core CPI to rise 0.2% month over month in July, while annual core inflation is forecast to ease to 2.5% from 2.6% in June. Producer price data on Thursday and retail sales figures on Friday could provide additional clues about inflation and monetary policy.

Oil prices also advanced, with Brent crude futures rising about 1.4% to roughly $85 per barrel amid uncertainty surrounding the Strait of Hormuz.

In Asia-Pacific currency markets, the Australian and New Zealand dollars slipped about 0.1%. Traders are also awaiting Tuesday’s Reserve Bank of Australia decision, with policymakers widely expected to keep the benchmark interest rate at 4.35%.