Dollar mostly flat as softer US data fuel dovish rate bets

The U.S. dollar remained mostly stable against major currencies on Tuesday as investors anticipated a dovish stance from the Federal Reserve following weaker economic data. The euro slipped from two-month highs, trading at $1.15760. In recent weeks, softer economic indicators, including unexpected job losses in July and mild inflation readings, have led investors to lower expectations of a rate hike by the U.S. Federal Reserve.

Market pricing for a September quarter-point increase has shifted to near a 70% chance of a pause. Eugene Epstein, head of structured products for Moneycorp North America, explained that the dollar's volatility reflects the market's interpretation of the Federal Reserve's dovish interpretation from the previous meeting. Chair Kevin Warsh's hawkish comments during the last Fed decision have been downplayed by the market.

The dollar was up 0.17% against the Swiss franc and down 0.04% against the British pound, nearing a three-month high. Inflation and geopolitical tensions, such as the ongoing conflict between Iran and the U.S., have also contributed to a cautious outlook on inflation and interest rates.