NEW YORK/LONDON, Aug. 18 (Reuters) - The U.S. dollar was mostly flat against major peers on Tuesday as markets continued pricing in a dovish response from the Federal Reserve in the wake of softer economic data.
The euro EUR= eased away from two-month highs of $1.161 touched on Monday and was last up 0.07% at $1.1587.
Data in the past few weeks have pointed to a softer U.S. economy, including unexpected job losses last month and mild inflation readings, leading investors to scale back expectations of an interest rate hike by the U.S. Federal Reserve.
Market pricing for a September quarter-point hike flipped toward a near-70% chance of a hold, after recent news of unexpected job losses in July and other economic data.
"Current levels, particularly dollar-denominated pairs, are just reflecting the surprised dovishness we saw in the last Fed meeting or at least the interpretation of dovishness," said Eugene Epstein, head of structured products for Moneycorp North America in Stamford, Connecticut.
"Leading up to the last Fed decision, Chair Kevin Warsh appeared to be a hawk. But now it appears not to be the case or at least that's not something the market is interpreting at this point. Combine that the data we've seen in terms of CPI, which did not imply inflation, and the last jobs number did not imply inflation as well. So suddenly, you have the dollar weakening and that is reflective across most currency pairs," he added.
The dollar was 0.15% higher against the Swiss franc CHF= to 0.812.
Sterling GBP= was up 0.01% against the dollar at $1.35420, just shy of the three-month peak it hit in the previous session.
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