USD weakened against most of its major rivals in the European session on Monday, erasing part of its Friday gains that were bolstered by U.S. July jobs data.
The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, decreased 0.27% to 106.33.
Friday’s release of the better-than-expected employment situation report for July corroborated the markets’ thinking that the Federal Reserve is to remain on an aggressive rate-hike path, lifting the U.S. currency.
According to CME FedWatch Tool, market participants are pricing in a 68.5% probability of the Fed increasing interest rates by 75 basis points at its September meeting.
Focus is now shifting to the U.S. July inflation data, set to be published on Wednesday, which is expected to provide more clarity on the Fed’s next rate move. According to economists’ forecast, the data will show a moderation of the annual pace of inflation to 8.7% in July from 9.1% in the previous month, which represented the highest advance since 1981.