US Dollar Index falls further to near 97.20 as Fed sets to cut interest rates
The US Dollar Index slides to near 97.20 as an interest rate cut from the Fed on Wednesday seems a done deal.
Market experts believe that the Fed will deliver two more interest rate cuts this year.
Investors await key US Retail Sales data for August.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 97.20 during the Asian trading session on Tuesday. This is the lowest level seen in three weeks.
The US Dollar (USD) continues to face selling pressure as the Federal Reserve (Fed) is widely anticipated to start the monetary-easing campaign in its policy announcement on Wednesday. According to the CME FedWatch tool, traders have fully priced in an interest rate cut by the Fed on Wednesday. Lower interest rates by the Fed bode poorly for the US Dollar.
Amid firm expectations that the Fed will bring interest rates down, investors will pay close attention to the monetary policy statement and Chair Jerome Powell’s press conference to get cues about the likely interest rate action in the remainder of the year.
Analysts at Deutsche Bank have anticipated that the Fed will cut interest rates by 25 basis points (bps) in each of the remaining three policy meetings this year, indicating that borrowing rates will go lower to 3.50%-3.75%.
On Monday, the United States (US) Senate narrowly confirmed President Donald Trump’s chosen economic adviser Stephen Miran as a member of the Fed’s Board of Governors ahead of the policy decision. Miran was placed in the replacement of Fed’s board after member Adriana Kugler unexpectedly resigned in early August.
Additionally, the independence of the Fed has been preserved for now by a US appeals court, as they ruled against Trump’s termination of Governor Lisa Cook over mortgage allegations. US assets fell sharply after Trump fired Cook, which market experts saw as an attack on the Fed’s independence.
In Tuesday’s session, investors will focus on the US Retail Sales data for August, which will be published at 12:30 GMT. The Retail Sales data is expected to have grown at a moderate pace of 0.3% on a monthly basis.
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