The US dollar index is holding at 100.7, not far from its 2024 low hit last month at 100.51.
The euro was trading at $1.1132, not far from a year-high of $1.1201. The yen was down at $140.71 per dollar after hitting a stronger $140 per dollar during light trading on Monday due to a holiday.
Rates: the market is betting on a more aggressive reduction
Federal funds futures have ralliedto raise the possibility of a 50 basis point rate cut to 65%, up from 30% a week ago. The odds have been dramatically reduced after media reports revived the prospect of more aggressive easing.
“Any sign of weakness in (Tuesday’s U.S. economic data) will only reinforce market speculation that there could be a 50-basis-point move,” said Jane Foley, senior currency strategist at Rabobank.
* “Regardless of which of the two steps, -25bps or -50bps, the (Fed) chooses on Wednesday, We believe the Fed’s message will be ‘dovish’,” Macquarie strategists said in a note to clients.
What will happen to the dollar against other currencies?
“ANDThe dollar could weaken against the main currencies in a very moderate toneeven with a -25 basis point cut (…) the biggest losses, if any, are likely to be experienced against the yen,” they said. “This is because the contrast between central bank outlooks will remain starkest between the Fed and the BOJ, for the time being.”
It is expected that the Bank of Japan to hold monetary policy steady on Friday, But he will signal that there will be more interest rate increases, perhaps making the next meeting in October an active one.
Sterling – the best-performing G10 currency this year, up 3.9% against the dollar – has also led the advance against the greenback thanks to signs of resilience in the British economy and sticky inflation.
Source: Ambito
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