Dollar retreats from highs but debt deal optimism fires up investors

Optimism over progress in U.S. debt ceiling talks and robust economic data reduced the likelihood of rate cuts, resulting in the dollar hovering close to two-month highs. Investors are reassessing their expectations for the central bank’s next move, resulting in short positions against the dollar worth nearly $12bn, which suggests some incentive to unwind some of those bets, allowing the dollar to rally. Influential U.S. inflation has not cooled fast enough for the Federal Reserve to pause its tightening campaign, according to two of its policymakers.