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Dollar stabilizes as traders weigh lower September hike odds and thin liquidity

Action Forex notes September Fed hike bets are still below 50%, while one-month implied volatility across most assets sits near year-to-date lows, leaving FX exposed to sharper moves in a thinner market.

Reported · Written up by our desk · Major Pairs

The US dollar is stabilizing after weakness linked to last Friday’s nonfarm payrolls, with major equity indexes trading mostly sideways and sovereign bond yields moving higher, according to Action Forex. The outlook for FX is being influenced by Middle East developments and energy prices. Action Forex says an interim US-Oman-Iran agreement remains elusive, raising the risk of renewed military operations, and that elevated oil prices, including December 2026 WTI futures, reflect uncertainty.

Action Forex points to interest-rate expectations as the main driver behind currency and broader risk moves. It says softer Fed rate hike expectations are keeping September hike bets below 50% despite hawkish Fed voices, and that the July 29 FOMC meeting minutes due Wednesday could clarify the balance of hawkish sentiment and potentially boost the dollar if the minutes skew hawkish.

While the week’s data calendar has been relatively quiet, Action Forex highlights upcoming releases that could inform the Fed’s next step, including housing data, the Philadelphia Fed Manufacturing survey, and S&P Global PMIs. It also notes that, outside yen crosses, one-month implied volatility for most assets is near year-to-date lows, consistent with subdued positioning during the summer lull and thin liquidity conditions.

Latest closeWTI crude $82.68 ▼0.6%

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