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The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar (USD) against six other major currencies, fell after two days of gains and was trading around 104.20 in early European trading on Monday.
Dovish sentiment surrounding the Federal Reserve’s policy stance weighed on the dollar. According to CME Group’s FedWatch tool, the market is pricing in a 91.7% probability of a 25 basis point rate cut at the Fed’s September meeting, up from 90.3% a week ago.
U.S. President Joe Biden on Sunday dropped his reelection bid amid growing pressure from fellow Democrats and endorsed Vice President Kamala Harris as the party’s candidate to take on Republican Donald Trump in the November election, Reuters reported.
New York Federal Reserve President John Williams said on Friday that long-term trends leading to a lower neutral interest rate before the pandemic remain in place. “My own Halton-Laubach-Williams estimates of neutral interest rates in the U.S., Canada and the eurozone are about where they were before the pandemic,” Williams noted, according to Bloomberg.
Fed Chairman Jerome Powell mentioned earlier this week that three U.S. inflation readings this year “have provided some added confidence” that inflation is on track to hit the Fed’s target on a sustained basis, suggesting a shift toward rate cuts may not be far off.
Traders are awaiting global PMI and GDP data due later this week for fresh insights into the state of the U.S. economy.
