Dollar Index DXY Expected to Fall for Six Consecutive Weeks as Rate Hike Expectations Cool

On August 14, the Dollar Index DXY fell to its lowest level since May, as unexpectedly weak U.S. retail sales data prompted traders to further reduce their expectations for interest rate hikes this year. Following the release of economic data, bond market traders withdrew their bets on the Federal Reserve raising borrowing costs in 2026. This tightening narrative has supported the dollar for the past few months, and this decline puts the dollar on track to record a weekly drop for the sixth time in the past seven weeks. The unexpectedly weak labor market report released last Friday, along with this week's moderate inflation data, contributed to the recent downward trend.