The US dollar continues to fluctuate, trading near its lowest levels in more than a year against the euro and the pound, as market participants expect a possible rate cut indicated by the dovish Federal Reserve. The minutes of the recent Federal Reserve meeting and signs of weak US labor market reinforced expectations of lower borrowing costs.
The dollar index, a measure against a basket of currencies including the euro, sterling and yen, remained relatively unchanged at 101.14. However, it fell to 100.92, marking its first drop this year. The euro settled at $1.1154, peaking at $1.1130 on Wednesday, a rise not seen since July 2023. Similarly, sterling settled at $1.3092, having climbed to $1.31195 previously, a level last seen in July of the previous year.
Federal Reserve officials showed strong tilt toward cutting interest rates at their next September September meeting, with some even supporting an immediate cut to them, as revealed in the minutes of Wednesday’s July 30-31 meeting, July. This position was further supported by a Labor Department report that noted that job growth was significantly lower than initially reported for the year before March.
Market traders are now pricing in a 38% probability of a 50 basis point rate cut at the September 17-18 Federal Reserve meeting, up from the 33% probability observed the previous day. There is also a 62% chance of a 25 basis point reduction. All eyes are on Federal Reserve Chairman Jerome Powell’s keynote speech at the Jackson Hole symposium on Friday for clues on the likely size of a September rate cut and the course of future policy meetings.
Read also:EUR rises to annual highs against the US dollar
A senior economist and currency strategist at the Commonwealth Bank of Australia expressed a preference for a 25 basis point rate cut, citing the strong state of the US economy and maintaining deeper cuts for the riskier economic outlook.
The dollar also fell against the yen, falling slightly to 145.09 yen, from 144.86 yen. Investors are seeking more clarity on the direction of Japan’s monetary policy after mixed messages from Bank Japan Governor Kazuo Ueda and Deputy Governor Shinichi Uchida.
In related currency movements, the Australian dollar rose to $0.6750, staying close to a five-week high of $0.6761 hit on Wednesday. Meanwhile, Governor Ueda is scheduled to testify at a special session of Japan’s parliament, where he will address the Japan’s unexpected rate hike at the end of last month.
Reuters contributed to this article.
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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