Wall Street enters the week on firmer footing after a run of soft US economic data pushed traders to slash the odds of a Federal Reserve rate hike next month. Futures pointed higher, the dollar slipped toward two month lows, and global shares edged up as investors bet the central bank has less room to tighten than they thought just a week ago.
Fed Rate Hike Odds Sink to 30 Percent
A September rate hike is now priced at just 30 percent, down sharply from roughly 50 percent a week earlier, according to CME Group’s FedWatch tool. The shift followed an unexpected drop in US retail sales for July, the first decline in nine months, along with a sharper than expected slide in consumer sentiment. Both readings landed on top of already soft inflation data, giving the Fed more reason to hold steady.
With Fed rate hike odds fading fast, Nasdaq futures firmed 0.5 percent and S&P 500 futures added 0.2 percent ahead of Monday’s open, extending a bullish run built almost entirely on fading rate hike risk. For more on how markets were positioning into this data heavy week, see our earlier coverage of Wall Street awaiting the CPI report.
Dollar Slides as Euro Hits Two Month High
The dollar bore the brunt of the shift, with the euro touching a two month high of 1.1588 dollars. The Australian and New Zealand dollars each climbed to 10 week peaks, at 0.7105 dollars and 0.5910 dollars respectively. A softer greenback typically supports commodity prices and gives US multinationals a modest earnings tailwind, a dynamic investors will be watching closely as second quarter results continue to roll in.
Treasury Yields Ease, Earnings Season Presses On
US Treasury yields slipped after a mixed finish last week. The two year yield eased 2 basis points to 4.154 percent, not far from a seven week low of 4.0977 percent touched last week. The 10 year yield also slipped 2 basis points, to 4.680 percent.
Earnings are lighter this week, but three major US retailers report: Home Depot, Target and Walmart. Investors will scrutinize each for signs of how resilient American consumers remain after the retail sales miss. The week’s biggest data point lands Thursday with the August S&P Purchasing Managers Indexes, which will show whether the summer’s pickup in business activity has legs.
Oil Holds Near 82 Dollars as Middle East Risk Lingers
US crude slipped 0.7 percent to 81.91 dollars a barrel, giving back a small piece of last week’s 5.4 percent surge. Brent crude was roughly flat on the day after climbing 6 percent last week. The moves came after Iran called on the United States to accept defeat in the standoff over the Strait of Hormuz, while President Trump urged Americans to accept higher gasoline prices while the conflict continues.
“While there is still no resolution to the Iran and Hormuz impasse, our base case remains that oil prices will stay in a 70 to 100 dollar range, with Iran preventing it going lower and the US moving to try and calm things down whenever it gets above 100,” said Shane Oliver, chief economist at AMP.
Oliver added that the risk of a durable peace deal failing to materialize remains real, and that with Middle East oil flows still running 10 to 15 percent below normal levels, higher prices could return as reserves are drawn down. For background on how the Hormuz standoff has moved energy markets in recent weeks, read our report on global stocks and oil holding near 83.50 dollars.
Gold Extends Its Climb
Gold bounced 0.5 percent to 4,397 dollars an ounce, adding to a 0.8 percent gain last week. Falling Treasury yields and a weaker dollar have both worked in the metal’s favor, alongside steady safe haven demand tied to the Middle East standoff.
Asia and Europe Trade Higher
The STOXX 600 rose 0.21 percent in early European trading, while MSCI’s broadest index of Asia Pacific shares outside Japan gained 0.5 percent and Japan’s Nikkei edged up 0.3 percent. Chinese blue chips rose 0.8 percent and Hong Kong’s Hang Seng climbed 1.6 percent ahead of China’s July activity data, with economists expecting industrial output growth to slow to 4.8 percent from 5.3 percent, though some investors are braced for an upside surprise after last month’s export boom tied to strong global AI demand.
What to Watch This Week for Fed Rate Hike Odds
- Fed rate hike odds for September now sit at 30 percent, down from roughly 50 percent a week ago.
- Retail earnings from Home Depot, Target and Walmart test the strength of the US consumer.
- August S&P PMI data due Thursday, the week’s key gauge of US business activity.
- US crude near 82 dollars a barrel, Brent little changed after last week’s 6 percent surge.
- Gold at 4,397 dollars an ounce as Treasury yields ease and the dollar weakens.
Source: Reporting by Lawrence White and Stella Qiu for Reuters, “Shares rise, dollar slips as markets pare Fed rate risks,” August 17, 2026. Read the original report on Reuters.
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About the author: Laura Anderson is a markets and currency correspondent at Daily Finance, covering FX intervention, central bank policy, and global macro trends.
