The Dollar Falls to Two-Month Low
The Dollar’s Decline
The dollar fell to its lowest level in over two months on Monday, extending a slide from the previous week. Investors believe that the U.S. Federal Reserve has completed its interest rate hike cycle and are now assessing when the central bank may start to cut rates.
Dollar Index and Market Conditions
The dollar index reached a low of 103.46, its weakest level since September 1, after a significant drop of nearly 2% the previous week. This marked the biggest weekly percentage decline since mid-July. Recent data has shown a slowdown in the economy and inflation pressures, leading markets to price out any additional Fed rate hikes.
Economic Calendar and Market Expectations
The economic calendar is relatively light due to the shortened work week in the U.S. with the Thanksgiving Day holiday on Thursday. Markets are currently speculating on when the Fed may begin to cut rates, with a greater than 50% chance of a cut of at least 25 basis points by May, according to CME’s FedWatch Tool.
Market Analysis and Expert Opinion
Joseph Trevisani, a senior analyst at FXStreet.com, believes that the market is convinced that the Fed has finished raising rates, leading to a gradual weakening of the dollar. He also mentioned that the Fed is focused on propping up rates, not necessarily the dollar.
Upcoming Events and Currency Movements
Later on Monday, Federal Reserve Bank of Richmond President Thomas Barkin is scheduled to speak. Additionally, minutes from the Fed’s latest meeting are set to be released on Tuesday, and investors will be looking for any signals on the central bank’s policy path. Against the softer greenback, the euro hit its highest level since August 30 at $1.0945, while the yen firmed to a 6-1/2-week high of 148.09 per dollar. The euro has been strengthening on expectations that the European Central Bank (ECB) will maintain its rate hike cycle after the Fed has finished.
Global Market Developments
Moody’s unexpectedly upgraded the outlook on Italy’s ‘Baa3’ sovereign rating to stable from negative and upgraded Portugal’s rating by two notches to ‘A3’. Sterling traded at $1.2485, reaching a two-month high of $1.2511.
