The dollar extended its slide into a new week with no fresh negative catalyst, as September rate-hike odds have fallen from roughly 60% earlier this month to around 25-30%. The next move now hinges on Wednesday's Fed minutes and whether Brent crude can finally clear $90 despite a collapse in Hormuz shipping traffic.
Dollar Slides Without a New Shock
The dollar started the week the same way it ended the last one: under broad selling pressure. This time, there was no fresh US data shock behind it — markets are still digesting weaker employment, softer retail spending and cooling inflation that have chipped away at the case for aggressive Fed tightening.
On the FX leaderboard, the dollar sits at the bottom, followed by the yen and loonie, while the Aussie leads and shows signs of acceleration, followed by the kiwi and Swiss franc. The euro and sterling sit in the middle of the pack.
Fed Minutes Could Reveal a More Hawkish Undertone
Wednesday's FOMC minutes matter more than usual because the post-meeting press conference gave little away about the internal debate. The headline vote was 9-3 for a hold, but that does not necessarily mean only three policymakers seriously weighed a hike. Some hold voters may have shared much of the dissenters' inflation concern without acting on it.
Dissenters Neel Kashkari and Lorie Logan framed their case around timing rather than a different destination, arguing for a preventive move now to avoid tightening harder later. Kashkari also argued that repeated supply shocks — the pandemic, Ukraine, tariffs and now the Middle East conflict — could stop inflation from behaving like a series of temporary disturbances. Still, the minutes describe a meeting held before softer July CPI, PPI and retail sales data arrived, which is why September rate-hike odds have since fallen dramatically.
Hormuz Traffic Has Collapsed, but Oil Stays Under $90
The US-Iran standoff shows a similar gap between existing stress and genuinely new information. The 60-day truce deadline arrives this week, but Oman continues talks with Tehran over reopening the Strait of Hormuz while Washington keeps its blockade of Iranian ports in place.
Only five cargo ships crossed Hormuz on Saturday and none on Sunday, compared with 31 during the previous weekend. Yet Brent's rebound on Monday still left crude capped beneath $90, suggesting much of the standoff is already priced in and oil now needs fresh escalation, not just persistence of the existing crisis, to build another risk premium.
Two Scenarios From Here
The dollar can keep weakening if the minutes show only narrow support for near-term tightening while Brent holds below $90 — both would reinforce the view that the Fed faces limited need for further hikes despite geopolitical risk. The opposite holds too: minutes showing several hold voters sympathized with preventive tightening would make markets more sensitive to the next strong US data, while a genuine Iran or Hormuz escalation that pushes Brent through $90 could revive inflation expectations on its own. Until one of those happens, dollar bears keep the advantage.
Source: ActionForex
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