US Dollar under pressure as credit downgrade and policy uncertainty rattle markets
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Moody’s downgrades US credit rating to ‘AA1’ from ‘AAA’ amid worsening fiscal outlook. Trump claims success in brokering ceasefire talks between Russia and Ukraine. Fed officials stress wait-and-see stance; trade policy adds to economic uncertainty. DXY holds near 100.30 with summer rate cuts looking increasingly unlikely. The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, remains pinned near the 100.30 level to start the week, with bearish sentiment lingering after Moody’s downgraded the US credit rating. The downgrade underscores growing concerns over fiscal deterioration and tariff-induced distortions under US President Donald Trump. Meanwhile, markets shrugged off Trump’s announcement of renewed Russia-Ukraine ceasefire negotiations. With Federal Reserve (Fed) officials maintaining caution and calling for more clarity before committing to policy changes, the DXY struggles to find upside momentum. Daily digest market movers: Not before the summer at earliest Moody’s cuts US credit rating to ‘AA1’, citing fiscal concerns and weakening macroeconomic metrics under Trump-era tariffs. President Trump claims personal success in restarting Russia-Ukraine ceasefire talks; Vatican offers to host negotiations. Fed’s Kashkari and Jefferson note significant uncertainty from trade policy, weighing on investment and hiring plans. White House advisor Kevin Hassett hints at more bilateral trade deals coming, but details remain sparse. Fed Chair Powell expected to speak later this week as markets digest risks to policy efficacy amid yield dislocation. Traders remain skeptical of the Greenback’s role as a safe haven with fears of coordinated Asian currency appreciation also building. The market sees a 91.6% probability of rates holding at 4.25%–4.50% in June and a 65.1% chance of no change in July. However, by September, a cut to 4.00%–4.25% is seen as nearly a coin toss (49.6%). Further easing is expected throughout 2025 and into 2026, potentially reaching 3.25%–3.50% by the…
Filed under: News - @ May 19, 2025 10:28 pm