The U.S. dollar remained close to a two-month low against major currencies on Monday as investors anticipated this week’s inflation data for insights into the Federal Reserve’s interest rate trajectory. The euro edged higher to $1.1558, hovering near its strongest level since mid-June, while sterling remained steady at $1.3490, close to a five-week peak. The yen maintained its position at 157.90 per dollar, relinquishing some gains attributed to intervention but staying significantly above the approximately 164 multi-decade low reached late last month. The dollar index, which tracks the currency against six major peers, was little changed at 99.6, hovering near its lowest level since June 2. Data released on Friday indicated that the U.S. economy unexpectedly lost jobs in July, with job gains for the preceding two months being revised significantly downward.

This development has tempered expectations for a Federal Reserve rate increase in the upcoming month. U.S. Treasury yields declined following a jobs report that undermined expectations for interest rate hikes, with the yield on benchmark U.S. 10-year notes recorded at 4.637%. The futures market has reduced the probability of a September move to approximately 44%, down from 67% a week prior. “The weaker ​U.S. labor-market signal has pulled down real-rate expectations, extended the dollar decline… but not yet a clean ​easing story,” Geoff Yu wrote in a note, adding that perceptions around U.S. inflation ‌data will ⁠likely be the biggest factor for currencies this week. A consensus estimate indicates that the core CPI is expected to rise 0.2% month-on-month in July, which would elevate the annual rate to 2.5% and continue the trend of gradual moderation in inflation.

The annual rate stood at 2.6% in June. Producer price data, scheduled for release on Thursday, along with retail sales figures set for Friday, will provide additional insights into the inflation outlook. “Although ​there’s a lot of ⁠inflation dynamics, the Fed will for now stay on the sidelines and wait to see how things play out,” Rodrigo Catril said ​in a podcast. Oil prices experienced an increase on Monday, with Brent oil futures rising by 1.4% to approximately $85 per barrel, reflecting ongoing uncertainty regarding the reopening of the Strait of Hormuz.

Iran announced that a deal with Oman, which outlines new shipping lanes, is nearing completion; however, it emphasised that the U.S. must fulfilll additional conditions. In Asia, the New Zealand dollar and Australian dollar each experienced a decline of 0.1%, settling at $0.7062 and $0.5889, respectively. Market participants are poised for the Reserve Bank of Australia’s rate decision on Tuesday. The central bank is anticipated to maintain its key rate at 4.35% for the remainder of the year.