Forex Today: US Dollar extends pullback to start new week

Here is what you need to know on Monday, August 17:

The US Dollar stays under pressure on Monday after posting losses against its major rivals to end the previous week. In the second half of the day, July Consumer Price Index (CPI) data from Canada will be watched closely by market participants, while the US economic calendar will not offer any high-impact data releases.

Following the softer-than-expected producer inflation figures on Thursday, the data from the US showed on Friday that Retail Sales contracted by 0.6% on a monthly basis in Friday, missing the market expectation for an increase of 0.1% by a wide margin. Additionally, the University of Michigan's Consumer Sentiment Index dropped to 51 in August's flash estimate from 55.2 in July. The USD Index continues to stretch lower after closing in negative territory on Friday and it was last seen losing 0.2% on the day at 99.43.

Fed repricing builds as softer US data temper 2026 hike expectations

Analysts at BNY note that “softer US data over the last few weeks have reduced rate hike expectations for the rest of 2026,” with markets increasingly questioning the likelihood of any renewed tightening cycle. They argue that “further progress on inflation over the next few months could seal the view that there won’t be a tightening of policy,” effectively locking in the perception that the Federal Reserve (Fed) is done hiking.

Against this backdrop, BNY expects upcoming activity data and communications to play a more nuanced role. The bank says “the PMIs will be watched for confirmation that growth remains resilient even as inflation concerns have moderated, but unless they surprise meaningfully, we doubt they’ll move the rates complex materially.” In a similar vein, it judges that “the FOMC minutes should be useful for gauging the balance of views inside the Committee, but with recent data still fresh in investors’ minds, they’re unlikely to change the market’s broader Fed outlook.”

In the meantime, the Memorandum of Understanding (MoU) signed between Iran and the US is set to expire on Monday with no signs of a broader deal. Crude Oil prices stay relatively quiet in the European morning on Monday. As of writing, the barrel of West Texas Intermediate (WTI) was trading marginally lower on the day at around $81.

USD/CAD stays under modest bearish pressure on Monday and trades at its lowest level since early June near 1.3860.

The data from Japan showed earlier in the day that the Gross Domestic Product (GDP) expanded at an annual rate of 1.1% in the second quarter. This print followed the 1.8% growth recorded in the first quarter and came in well below the market expectation for an expansion of 2%. Despite the disappointing data, USD/JPY stays on the back foot in the European morning and trades in negative territory near 159.00.

EUR/USD preserves its bullish momentum and trades at its highest level in two months, near 1.1600.

GBP/USD continues to edge higher after ending the previous week with small gains and trades at around 1.3550.

Gold shows resilience following last week's choppy action and clings to gains at around $4,400.