US Dollar slumps below 98.00 as Fed rate cut odds rise, Fedspeak awaited
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its losses for the second successive session and trading around 97.80 during the European hours on Wednesday.
The Greenback faces challenges amid easing risk aversion following the latest United States (US) inflation data, which strengthened expectations for a US Federal Reserve rate cut in September. The CME FedWatch tool indicates that markets are now pricing in approximately 96% odds of a Fed rate cut at the September meeting, up from 86% a day ago.
The US Consumer Price Index (CPI) rose 2.7% year-over-year in July, matching the 2.7% increase seen in the prior month, and came in below the expected 2.8% increase. Meanwhile, the annual core CPI rose by 3.1% in July, compared to the 2.9% rise seen in June, above the market consensus of 3%. On a monthly basis, the CPI and the core CPI rose by 0.2% and 0.3%, respectively, to match analysts' estimates.
The US Dollar also came under pressure after White House spokeswoman Karoline Leavitt said US President Donald Trump is considering legal action against Fed Chair Jerome Powell over his handling of renovations at the central bank’s headquarters, raising concerns about the Fed’s independence.
Last week, Fed Governor Michelle Bowman stated that three interest rate cuts are likely to be appropriate this year. Traders will likely focus on Wednesday’s speeches from Richmond Fed President Thomas Barkin, Atlanta Fed President Raphael Bostic, and Chicago Fed President Austan Goolsbee to seek fresh cues on the US monetary policy outlook.
Source: FXstreet
