Dollar bears were installed with inspiration following the weak U.S. productivity data, which created a cloud of uncertainty over the likelihood of the Federal Reserve raising U.S. rates in 2016. U.S. productivity has fallen for the third consecutive quarter, which may simply heighten fears of a deceleration in Q3 GDP consequently obstructing efforts taken by the Fed to break the trend of central bank caution. Although July’s blockbuster nonfarm payrolls of 255,000 initially bolstered expectations of a probable rate hike as close as September, investors have returned to normality with the CME FedWatch tool displaying a 40.6% probability of a December hike. Overall, despite yesterday’s soft productivity data, sentiment still remains somewhat bullish towards the dollar and the encouraging outlook towards the U.S. economy could provide a foundation for bulls to send the U.S. Dollar Index higher.
Stock market rally cools
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