The US Dollar faced pressure, with the dollar index stabilizing at 99.4 on Tuesday after recently hitting a two-week low. This comes amid strong expectations that the Federal Reserve will cut interest rates next week. Economic data, particularly the contraction in factory activity, reinforces the case for easing. The market is also attentive to the upcoming ADP employment report and PCE data, which could provide further insights into the Fed’s policy direction.
- The dollar index held at 99.4 on Tuesday after touching a two week-low on Monday.
- Traders are pricing in an 87% chance the Fed will lower rates by 25bps at its upcoming meeting.
- President Trump said he had chosen the next Fed Chair, with reports pointing to Kevin Hassett as a leading contender who favors lower rates.
- Factory activity shrank for the ninth consecutive month and at the fastest pace in four months.
- Attention shifts to Wednesday’s November ADP employment report and Friday’s delayed September PCE data.
The current environment suggests a weakening dollar. A potential interest rate cut by the Federal Reserve, coupled with a preference for lower rates from a possible new Fed Chair, could devalue the currency. Weakening factory activity further supports this outlook, potentially leading to a less attractive investment environment for the dollar. Investors will likely be closely monitoring upcoming economic data to gauge the extent of potential policy adjustments.