Deutsche Bank: US Dollar Weakened as a Reflection of Repricing of Rate Hike Path

BlockBeats News, July 30th, the Foreign Exchange Research Team of Deutsche Bank pointed out that after the Federal Reserve kept interest rates unchanged but significant internal dissent was exposed, the US Dollar Index once fell, and the Euro once rose. The dovish tone of the US dollar, along with market pricing for a rate hike in September and the uptick in long-term US Treasury yields, had jointly driven the EUR/USD to expand its gains, reflecting a shift in market expectations for US monetary policy. The bank's analysts stated: "Three officials dissented, supporting a 25 basis point rate hike, highlighting growing concerns about persistent inflation."

The market interpreted this decision as less hawkish than implied by the dissenting votes, leading to a decline in US 2-year Treasury yields and the US dollar. However, long-term yields surged as investors believed the Fed's response was insufficient to curb ongoing inflation. Federal funds rate futures indicate a 63% probability of a 25 basis point rate hike in September. The market has reduced the expected cumulative rate hikes for the year from 42 basis points on Tuesday to 33 basis points.

(FXStreet)