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The US Dollar depreciates due to heightened expectations of the US Fed reducing rates in September. CME FedWatch tool suggests 72.0% odds of a 50-basis point Fed rate cut in September, up from 11.8% last week. The rising geopolitical tensions in the Middle East could drive increased safe-haven demand for the Greenback. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six other major currencies, retraces its recent gains from the previous two sessions, trading around 103.00 during the Asian session on Thursday. This downside of the DXY could be attributed to the rising expectations of the US Federal Reserve (Fed) implementing a more aggressive rate cut beginning in September. According to the CME FedWatch tool, there is now a 72.0% probability of a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September, up from 11.8% a week earlier. The expectation of deeper rate cuts may put pressure on the US Dollar in the near term. Weaker employment data from July have heightened concerns about a potential US recession. US Nonfarm Payrolls (NFP) came in weaker than the expectation, data showed on Friday. Meanwhile, the US Unemployment Rate rose to the highest level since November 2021 in July. Earlier this week, Chicago Fed President Austan Goolsbee stated that the US central bank is prepared to act if economic or financial conditions worsen. Goolsbee emphasized, “We’re forward-looking about it, and so if the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it.” according to Reuters. Additionally, the decline in US Treasury yields contributes to downward pressure for the US Dollar (USD), with 2-year and 10-year yields on US Treasury yields trading around 3.94% and 3.90%, respectively,…

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Filed under: News - @ August 8, 2024 8:24 am