What’s going on here?
The US dollar is holding steady near its lowest point in over a year, as traders anxiously await signals on potential US interest rate cuts.
What does this mean?
The dollar index edged up slightly to 100.61, staying just above its 13-month low of 100.51. Despite this minor uptick, the dollar has slipped 3.4% this month, marking its biggest monthly decline since November 2022. As traders focus on the Federal Reserve’s upcoming interest rate decision, expectations for a 50-basis point cut have increased to 36%, up from 29% last week, according to the CME Group’s FedWatch Tool. Markets have priced in a 25-basis point cut and anticipate more than 100 basis points of rate reductions by the end of the year.
Why should I care?
For markets: Holding the line on currency flux.
The dollar’s movement isn’t happening in isolation – it’s affecting other currencies too. Sterling fell slightly to $1.32585 after reaching its highest point since March 2022. The euro dipped marginally by 0.05% to $1.117825, near its 13-month high, while the yen declined to 144.225 per dollar. Meanwhile, the Australian dollar stayed around $0.6791, close to a one-month high. Bitcoin also took a hit, dropping over 6% initially and trading down 4.37% at $59,137.00. These shifts indicate market sentiment around impending rate cuts.
The bigger picture: Economic indicators in the spotlight.
All eyes are on key economic data set to be released this week, including the US GDP estimate for Q2 and the Fed’s preferred inflation gauge, the personal consumption expenditures index. A senior market analyst at City Index suggests that only a significant upside surprise in these data points could shift expectations about the Fed’s rate cuts. As it stands, the market is already factoring in multiple cuts to ease economic pressures.
