"Beyond political strains, the dollar faces additional pressure from market expectations of interest rate cuts. Markets are now pricing in an almost certain rate cut in October, with another likely in December. These expectations reflect investors' belief that the Federal Reserve may turn to monetary easing to counter economic slowdown and support the labour market-reducing the dollar's appeal relative to other currencies."
"Recent comments from St. Louis Fed President Alberto Musalem have deepened this uncertainty. He emphasized that the Fed could support a rate-cut path if labour market risks or inflation control failures emerge, stressing the need for a flexible, balanced approach rather than a predetermined policy path. This suggests that markets will remain highly sensitive to every official statement or economic release, keeping the dollar prone to swift fluctuations."
The U.S. Dollar Index is trading near 98.40 after partial recovery, reflecting heightened volatility. A prolonged U.S. government shutdown has reached its 19th day, undermining confidence in fiscal management and weighing on investor sentiment toward the dollar as a safe-haven asset. Market pricing now implies an almost certain Federal Reserve rate cut in October and another likely in December, lowering the dollar's appeal relative to other currencies. Comments from St. Louis Fed President Alberto Musalem underscore a flexible, data-dependent path to policy, increasing sensitivity to official statements and economic releases and amplifying short-term dollar fluctuations. Progress in U.S.-China trade talks could offer temporary relief.
Read at London Business News | Londonlovesbusiness.com
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