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US dollar falls to 7-month low over Fed’s rate cut in September
(MENAFN) The US dollar fell to a seven-month low on Tuesday, driven by speculation that the Federal Reserve may start cutting interest rates next month. Traders are now focused on Federal Reserve Chairman Jerome Powell's upcoming remarks on Friday. The weakening of the dollar boosted the euro to its highest level this year, while the British pound hovered near a one-month high, and an index tracking emerging market currencies reached a record level, according to a UK news agency.
This week’s attention is centered on Powell’s speech at the Jackson Hole symposium, which could make investors cautious about making significant bets before the event. Additionally, the release of the minutes from the Federal Reserve’s latest meeting, scheduled for Wednesday, is highly anticipated. Investors are largely expecting Powell to acknowledge the necessity of cutting rates, and they will closely analyze his speech for indications on whether the rate cuts will begin with a 25 or 50 basis point reduction in September.
According to the CME Group’s FedWatch service, market expectations show a 24.5 percent probability of a 50 basis point rate cut in September, a decrease from 50 percent a week earlier. There is now a 75.5 percent chance of a 25 basis point cut. Traders also anticipate a cumulative rate cut of 93 basis points by the end of the year.
On Tuesday, the euro last traded at USD1.10775, after reaching USD1.108775, its highest level since December 28, during early trading. The euro has risen by 2.4 percent this month, positioning it for its strongest monthly performance since November. The pound remained steady at USD1.2979 in Asian trading, following a one-month high of USD1.2998 in the previous session. The dollar index, which tracks the greenback against six major currencies, was last at 101.95, after hitting its lowest point since January 2 at 101.82. The index has dropped more than 2 percent in August and is set to decline for the second consecutive month. Expectations of a rate cut also lifted the Australian and New Zealand dollars to their highest levels in a month, with the Australian dollar last at USD0.6719 and the New Zealand dollar at USD0.61205.
This week’s attention is centered on Powell’s speech at the Jackson Hole symposium, which could make investors cautious about making significant bets before the event. Additionally, the release of the minutes from the Federal Reserve’s latest meeting, scheduled for Wednesday, is highly anticipated. Investors are largely expecting Powell to acknowledge the necessity of cutting rates, and they will closely analyze his speech for indications on whether the rate cuts will begin with a 25 or 50 basis point reduction in September.
According to the CME Group’s FedWatch service, market expectations show a 24.5 percent probability of a 50 basis point rate cut in September, a decrease from 50 percent a week earlier. There is now a 75.5 percent chance of a 25 basis point cut. Traders also anticipate a cumulative rate cut of 93 basis points by the end of the year.
On Tuesday, the euro last traded at USD1.10775, after reaching USD1.108775, its highest level since December 28, during early trading. The euro has risen by 2.4 percent this month, positioning it for its strongest monthly performance since November. The pound remained steady at USD1.2979 in Asian trading, following a one-month high of USD1.2998 in the previous session. The dollar index, which tracks the greenback against six major currencies, was last at 101.95, after hitting its lowest point since January 2 at 101.82. The index has dropped more than 2 percent in August and is set to decline for the second consecutive month. Expectations of a rate cut also lifted the Australian and New Zealand dollars to their highest levels in a month, with the Australian dollar last at USD0.6719 and the New Zealand dollar at USD0.61205.
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