The US dollar continued to depreciate on Friday as markets focused on the Federal Reserve meeting. While expectations for an interest rate cut grow, there's uncertainty about the extent of the cut—whether it will be 25 or 50 basis points. This continued dread has created cautious sentiment in the markets which is now weighing heavily on the dollar.
Stronger expectations for a larger rate cut have been a significant factor in the dollar's recent decline. As Treasury yields dropped, particularly the 10-year US Treasury yield falling below 3.7%, this has further reflected the uncertainty surrounding the expected extent of rate cuts, putting additional pressure on the dollar.
With the upcoming Michigan consumer sentiment report for September, market participants are keenly interested. A stronger-than-expected report from consumers could potentially bolster the US dollar and allay some prevailing concerns about the overall U.S. economic situation, illustrating the close connection between consumer sentiment and currency strength.
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