US Dollar Drops on Fading Rate Hike Expectations

Once again, the US dollar’s performance is being tied to rate hike speculation. With concerns about what the ISM non-manufacturing composite will show, the greenback is heading lower as rate hike expectations fade. The dollar index is dropping as traders and analysts re-think speculation about when to expect the Federal Reserve to take action again.

The latest ISM data is out, and it looks as though the index fell to 51.4 in August from 55.5 in July. Anything above 50 represents expansion, but it looks as though service companies are growing at a slower pace than expected — and the slowest pace in more than six years.
With this news, speculation that the Federal Reserve will institute another rate hike sooner rather than later is fading. With a slowing services sector, the Fed might be unwilling to raise rates as early as expected and that is weighing on the greenback and sending it significantly lower against its major counterparts today.
At 15:50 GMT the US dollar index is down to 25.025 from the open at 95.791. EUR/USD is heading higher, gaining to 1.1235 from the open at 1.1148. GBP/USD is also higher, moving up to 1.3428 from the open at 1.3303. USD/JPY is lower, dropping down to 102.69 from the open at 103.44.

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