Hawkish vs. Rate Cut: Who Wins?
The US Dollar Index (DXY) continued its strengthening for a second day and briefly hovered around 98.20 during the Asian session, driven by hawkish comments from Kansas City Fed President Jeffrey Schmid. He emphasized that the Fed must maintain credibility in combating inflation, stating that inflation remains too high, and assessing that current monetary policy is "properly calibrated."
However, this encouragement is met with growing expectations of an interest rate cut, coupled with the ongoing US government shutdown. The CME FedWatch tool now projects a 94% chance of a 25 bps cut in October and an 84% chance of an additional 25 bps in December. The shutdown has delayed the release of key data such as the September Nonfarm Payrolls (NFP), making the market increasingly reliant on alternative signals.
These alternative signals—such as weakness in the ADP data and JOLTS job openings—add more weight to the case for an interest rate cut. On the political front, the White House denied claims that government layoffs had occurred, although it warned that such a risk could arise if the deadlock continues into its seventh day. Meanwhile, the Senate again failed to pass a funding package. The result: The DXY remains supported by hawkish sentiment, but is vulnerable to correction if the likelihood of a rate cut strengthens or the shutdown drama worsens. (az)
Source: Newsmaker.id
