USD Weakens Amid Fed Rate Cut Speculation

Here’s this week’s overview of the US Dollar:

•  In the past week, the US Dollar Index weakened by 0.3% against a trade-weighted basket of its peers.

• The dollar index fell to 101 on Friday, sliding for the third straight session on growing speculation that the Federal Reserve will cut interest rates more aggressively at this week’s policy meeting.

• Markets are currently pricing-in a 59% chance that the Fed will deliver a larger 50 basis point rate cut on Wednesday, up from 25% a month ago, while the probability of a modest 25 bp reduction stands at 41%, implied by futures pricing.

• Those expectations came even after key inflation figures for August came in hotter than anticipated last week, although the latest jobs data pointed to signs of a slowing labour market.

• Investors also look ahead to US retail sales and industrial production numbers on Tuesday for more insights on the economy.

• The dollar weakened across the board, with the most pronounced selling activity seen against the Yen, Euro and Sterling.