The U.S. dollar fell on Tuesday, nearing seven-month lows amid growing conviction that the Federal Reserve will cut interest rates in September September.
The dollar index is currently at 101.662 against a basket of foreign currencies in sideways trading today. The dollar awaits the manufacturing PMI data, as well as the Jackson Hole symposium and the talk of the US Federal Reserve Chairman, Jerome Powell.
Dollar weakens on optimism that the Federal Reserve will cut interest rates
The US dollar fell more than 2% over the past month, in parallel with US Treasury yields, amid growing optimism that the US central bank will cut interest rates in September September.
Federal Reserve Chairman Jerome Powell is scheduled to speak at the Jackson Hole Symposium conference on Friday, and traders are looking for more clues on when and how much the central bank will cut interest rates.
“We think Powell will be reassuring and consistent with a soft baseline for a series of 25, but it will make clear that the Fed is open to 50, and that the ceiling for that is not too high,” Evercore ISI said.
However, Evercore added ISI: “We don’t expect strong guidance on whether the first step will be a 25 basis point or 50 basis point cut.” Instead, Powell is expected to indicate that the decision will depend on upcoming business data.
The Fed has maintained its benchmark overnight interest rate in the current range of 5.25% to 5.50% since last July, and traders have priced the entire interest rate in a 25 basis point rate cut from the Fed in September, with a 24.5% probability of a 50 basis point move.
Read also:Urgent: Sudden move by Turkish banks to support the lira before the interest rate decision
EUR/USD at this year’s highest level
In Europe, the EUR/USD was largely unchanged at 1.1086, as a weaker dollar lifted the euro to its highest levels this year.
The single currency is up around 2% this month and is on track for its strongest monthly performance since November.
The Eurozone’s consumer price index (CPI) was confirmed to be stable at a steady level on a monthly basis in July, a 2.6% year-on-year rise, confirming that inflationary pressures remain weak.
GBP/USD Sterling rose 0.2% to 1.3009, rising to a one-month high on a weaker dollar.
Traders are divided over the chances of the US central bank cutting another rate cut on the Bank of England a month from now, after the US central bank began its rate cut campaign earlier this month in a decision soon.
Yen settles ahead of Ueda speech
In Asia, the USD/JPY index fell 0.1% to 146.35, close to a previous session high that approached a two-week high, but well away from a seven-month low of 141.67 touched at the beginning of August.
Investors’ eyes will turn to Japan Bank Governor Kazuo Ueda when he appears in parliament on Friday. Ueda is expected to discuss the Bank of Japan’s decision last month to raise interest rates, and the focus will be on whether to stick to its latest hawkish tone.
USD/CNY The euro was unchanged at 7.1395, receiving little support from the People’s Bank of China keeping its benchmark loan base rate as expected.
The August rate fixation came after the People’s Bank of China unexpectedly cut its interest rate in July, as China’s central bank moved to further boost economic growth.
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