Dollar at risk as markets bet on more Fed rate cuts

The US dollar rebounded slightly but remained close to its recent low. The currency could remain relatively stable on Thursday ahead of new economic data releases as traders monitor any changes in monetary policy expectations.

Bets of more aggressive Federal Reserve easing this year have been increasing and could leave the dollar under pressure.

US Treasury yields extended their decline, with the 10-year note hovering near 4.21% as dovish expectations continued to push yields to the downside. Markets continue to see a near certainty for a cut in September and two more cuts before the end of the year, which could help maintain the downtrend in yields.

Traders could look for more signs of a cooling labor market later today as jobless claims data is released. Market participants and Fed members have been more focused on the strength of the job market since the last NFP report and downward revisions to prior data.

The market could also turn to July’s producer price index for an update on inflation and the impact on policy expectations. Stronger-than-expected results could provide the dollar with short-term support, while a divergence between jobs data and inflation could introduce some uncertainty.