Dollar Weakens, Shutdown and Potential Interest Rate Cuts Pressure Markets
The US Dollar Index (DXY) was under pressure around 98.40 in early Asian trading on Monday, continuing its decline from the previous session. This pressure occurred as the US government shutdown entered its 19th day with no signs of resolution, making it one of the longest shutdowns in modern US history. This uncertainty has made market participants more cautious regarding dollar-based assets.
Furthermore, expectations that the Federal Reserve will cut interest rates are growing. According to the CME FedWatch Tool, the probability of a rate cut in October is now nearly 100%, and 96% for December. St. Louis Fed President Alberto Musalem stated that if risks to the job market increase and inflation remains manageable, he supports further rate cuts—signaling that the direction of monetary policy remains flexible and dependent on the latest economic conditions.
Meanwhile, on the geopolitical front, President Donald Trump stated that the US could consider lowering tariffs on China, but Beijing would have to make some reciprocal offers, including in soybean purchases. Trump also expressed confidence that a deal could be reached, particularly regarding agricultural commodities. This statement has somewhat eased market tensions and provided a floor for further dollar weakness.
US Treasury Secretary Scott Bessent is scheduled to meet with Chinese Vice Premier He Lifeng in the next few days, ahead of a possible meeting between President Trump and President Xi at the end of the month. If these talks bear fruit, market sentiment could improve, but as long as fiscal uncertainty and interest rates remain high, the dollar could remain under pressure in the short term. (ads)
Source: Newsmaker.id
