Dollar Extends Slide as Traders Scale Back Fed Tightening Bets

Dollar Extends Slide as Traders Scale Back Fed Tightening Bets

Mon, August 17, 2026 at 12:20 PM GMT+3 1 min read

(Bloomberg) -- The dollar fell to its weakest level in three months as investors scaled back expectations for further Federal Reserve interest-rate increases following a run of softer US economic data.

Most Read from Bloomberg

The Bloomberg Dollar Spot Index dropped for a third day and hit its lowest since May 15. That came as traders cut the chance of a Fed hike next month to just one-in-three, down from about 75% in late July.

The moves follow soft July figures on employment and inflation, as well as an unexpectedly weak report on US retail sales. While there are few major releases this week to trigger a material dollar breakout, Friday's global PMIs may offer the next meaningful test.

Stronger US data could revive the dollar if it reinforces America's growth advantage, according to Elias Haddad, global head of markets strategy at Brown Brothers Harriman.

Yet with markets now pricing only about 36 basis points of additional tightening this cycle, the options market points to more pressure on the greenback in the short term. One-month options have turned against the dollar for the first time since late February, while longer-dated contracts remain dollar positive.

The key event this week is likely to be Wednesday's release of the minutes of the July FOMC meeting, said Chris Turner, global head of markets at ING.

"We think it will be hard for the market to switch back to a fully hawkish mindset if there are a few sentences in the minutes pointing to a closer call on the unchanged rates decision than most think," he said.

Most Read from Bloomberg Businessweek

©2026 Bloomberg L.P.