- US 10-year treasury yields lose ground
- Fed commences policy meeting today
- Strong odds of a 0.5% Fed rate cut
The US dollar fell in European trade on Tuesday against a basket of major rivals, extending losses for the fourth straight session and plumbing three-week lows as US 10-year treasury yields lost ground.
Recent media reports boosted the odds of a 0.5% Fed rate cut this week, with investors now waiting for important US retail sales data later today to gather more clues.
The Federal Reserve is meeting today to discuss policies, and is expected to start a new cycle of monetary policy easing.
The Price
The dollar index fell 0.2% today to 100.57, the lowest since August 28, with a session-high at 100.77.
The index lost 0.4% on Monday, the third loss in a row, as US treasury yields declined.
US Yields
US 10-year treasury yields fell 0.4% on Monday, extending losses for the third straight session, and about to plumb 15-month lows at 3.605%.
The developments came amid increasing speculation about a huge Fed rate cut this week.
US Rates
Interesting reports from the Wall Street Journal and Financial Times indicate that this week’s Fed interest rate decision will be more complex than expected, following recent labor data.
According to the Fedwatch tool, the odds of a 0.5% Fed rate cut this week surged to 69%, while the odds of a smaller 0.25% cut fell to 31%.
US Retail Sales
Later today, important US retail sales data for August will be released. Retail sales reflect the strength of consumer spending, which constitutes 70% of total GDP.
- ECB almost rules out October rate cut
- Fed commences policy meeting today
The euro rose in European trade on Tuesday against the dollar for the second straight session, scaling a two-week high amid increasing bets on a 0.5% Fed rate cut this week, which would reduce the interest rate gap with Europe.
The European Central Bank mostly ruled out another rate cut in October, and conversely, the Federal Reserve is increasingly likely to cut interest rates by 50 basis points tomorrow.
The Price
The EUR/USD pair rose 0.1% today to $1.1138, the highest since September 6, with a session-low at $1.1115.
The pair rose 0.55% on Monday, marking the second profit in three sessions, and the largest since August 23.
The ECB
After the ECB’s decision to cut interest rates last week, Reuters reported from sources that the ECB is ruling out another rate cut in October.
Reuters’ sources indicate the ECB policymakers don’t see a need for an October rate cut, unless a serious economic slowdown occurred.
European Rates
Investors now expect about 36 basis points of rate cuts by the ECB throughout the rest of 2024, which means more than a single rate cut before the year end.
US Rates
Interesting reports from the Wall Street Journal and Financial Times indicate that this week’s Fed interest rate decision will be more complex than expected, following recent labor data.
According to the Fedwatch tool, the odds of a 0.5% Fed rate cut this week surged to 69%, while the odds of a smaller 0.25% cut fell to 31%.
The US dollar fell against most major rivals on Monday as markets await the Federal Reserve’s meeting and policy decisions this week.
Fed officials are convening on Tuesday and Wednesday to decide on policies, with virtually all investors expecting the Fed to start a new policy easing cycle in order to boost economic growth and employment.
According to the Fedwatch tool, there’s a 63% chance of a 0.5% Fed rate cut this week, up sharply from 30% just a week ago, and with a 37% chance of a 0.25% rate cut.
On trading, the dollar index fell 0.4% as of 21:12 GMT to 100.6, with a session-high at 101.1, and a low at 100.5.
Aussie
The Australian dollar rallied 0.7% against its US counterpart as of 21:28 GMT to 0.6753.
Loonie
The Canadian dollar was mostly flat against its US counterpart at 21:28 GMT.
Gold prices stabilized on Monday even as the dollar fell against most major rivals ahead of the Federal Reserve’s policy meeting.
Fed officials are convening on Tuesday and Wednesday to decide on policies, with virtually all investors expecting the Fed to start a new policy easing cycle in order to boost economic growth and employment.
According to the Fedwatch tool, there’s a 63% chance of a 0.5% Fed rate cut this week, up sharply from 30% just a week ago, and with a 37% chance of a 0.25% rate cut.
Otherwise, the dollar index fell 0.4% as of 21:12 GMT to 100.6, with a session-high at 101.1, and a low at 100.5.
On trading, gold spot prices barely inched down as of 21:13 GMT to $2609.9 an ounce.
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