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Dollar slips from two-month highs as odds of October Fed hike fall

The dollar index pulled back as the market cut the probability of an October Fed rate rise from 72% to 45%, alongside weaker oil prices.

Reported · Written up by our desk · Major Pairs

The US dollar retreated from two-month highs as traders reduced the odds of an October Fed rate hike, with the probability falling from 72% to 45%, according to Action Forex. The move also coincided with a slump in oil prices.

Action Forex said the dollar index’s level above 101 has acted as a pivot for more than a year, and that the corrective rebound seen in May 2025 stalled there. It added that June and July gains from early 2026 lows have also stalled in the same area.

The outlet attributed the pullback to changes in Fed messaging and rising longer term yields. Action Forex pointed to comments from New York Fed President John Williams saying there is no urgency for further monetary policy changes after September, even as he indicated another hike may still be needed before year end.

Action Forex noted the dollar is still on track to end September with its best performance since June, helped by the Fed’s hawkish shift and a surge in long term Treasury yields to 24-year highs. It said the market is reassessing the outlook, with the balance of power potentially shifting back toward hawks if the Fed tone changes.

Latest closeDollar index 101.25 ▲0.3%

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