Market conditions show the dollar index near 2.5-month lows, having declined roughly 1% this week as investors anticipate the Federal Reserve’s monetary policy decision. Expectations are high for a rate cut, fueled by cooling labor market data despite persistent inflation. US retail sales demonstrated resilience with a third consecutive month of gains.
- The dollar index is around 96.7, near 2-½-month lows.
- The dollar has fallen about 1% this week.
- The market expects a quarter-point rate cut from the Federal Reserve.
- Markets are pricing in roughly 67 basis points of total easing by year-end.
- Easing expectations are supported by a cooling labor market.
- Inflation remains above the Fed’s 2% target.
- Investors will watch the Fed’s “dot plot” projections for rate path signals.
- US retail sales rose in August for a third straight month.
- The dollar slipped against major peers, hitting a four-year low against the euro.
This data suggests a weakening dollar influenced by expectations of looser monetary policy in response to economic data. The combination of a cooling labor market, anticipation of rate cuts, and rising retail sales creates a complex environment for the currency. The dollar’s depreciation against major currencies, notably the euro, reflects this sentiment and indicates a potential shift in its relative value.