According to CoinMeta, weak retail sales data in July further weakened market expectations for interest rate hikes by the Federal Reserve in the coming months. As a result, short-term U.S. Treasury yields rose, with the yield on two-year Treasuries briefly dropping below 4.10%, the lowest level since June 30. Ian Lyngen, head of capital markets U.S. interest rate strategy at BMO, said: “This is an troubling update regarding the overall health of consumers, which will provide a rationale for the Federal Reserve to pause interest rate hikes next month.” Interest rate contracts indicate that traders are withdrawing their bets on a hike at the September meeting, and expectations for more than one hike by mid-2027 are also weakening. The decline in expectations for Federal Reserve tightening accelerated over the past week, beginning with employment data that fell short of expectations on August 7 and continuing this week due to modest consumer and producer price data.