US Dollar Weakens, Is This the Start of a Larger Downtrend?
The US dollar index held around 99.4 on Tuesday, after hitting a two-week low on Monday. This weakening occurred as the market grew more confident that the Federal Reserve would cut interest rates in the near future. The ISM Manufacturing PMI data showed that US factory activity has shrunk for nine consecutive months, and this past month saw the fastest decline in four months. This condition reinforces the view that the economy is slowing and needs support from monetary policy.
Currently, market participants estimate an 88% chance that the Fed will cut interest rates by 25 basis points at its meeting next week. Amidst this situation, additional political news emerged: President Donald Trump stated that he has already selected his candidate for the next Fed Chair, and many reports have named Kevin Hassett, Director of the White House National Economic Council, as the leading candidate. The change in Fed leadership has the potential to influence the direction of future interest rate policy, so the market is keeping a close eye on it.
Investors' primary focus now turns to comments by Fed Chair Jerome Powell, scheduled for later today. The market will be looking for clues as to whether Powell supports further interest rate cuts or remains cautious. If Powell's tone sounds dovish (tending to support rate cuts), the dollar index could come under further pressure. Conversely, if he signals a more cautious stance, the dollar's weakness may be somewhat mitigated, although pressure from weak economic data remains. (az)
Source: Newsmaker.id
