Dollar Weakens to Lowest Level, Market Focuses on PCE Inflation Data
The US Dollar Index (DXY) weakened to around 97.25, its lowest level in more than three years, in Asian trading on Wednesday (6/26). This weakening occurred after news emerged that President Donald Trump was considering appointing a new Fed Chair earlier than scheduled. Trump said he already had three or four candidates to replace Jerome Powell, triggering market concerns that the Fed's independence would be compromised and monetary policy could be looser (dovish).
This condition has boosted expectations of an interest rate cut by the Federal Reserve, with the market now pricing in a 25% chance of a rate cut in July, up from just 12% last week. In addition, the decline in US Gross Domestic Product (GDP) by 0.5% in the first quarter of 2025, worse than expected, also weighed on the dollar exchange rate against other major currencies.
The market focus now shifts to the release of PCE (Personal Consumption Expenditures) inflation data on Friday. PCE is the Fed's favorite measure of inflation. If the PCE data shows higher-than-expected inflation, it could curb further dollar weakness, as market participants will reassess the chances of a rate cut in the near term.
Source: (ayu-newsmaker)
