Dollar Index Holds Near Two-Month Lows at 104 as Economic Weakness Boosts Fed Rate Cut Expectations

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Dollar Index Hovers at Two-Month Lows Near 104 Amid Expectations of Fed Rate Cuts and Economic Weakn

Team FS

04/Jun/2024

Key Points:

The dollar index holds near two-month lows around 104 amid expectations of Fed rate cuts.
US manufacturing activity contracted further in May, reinforcing expectations for Fed interest rate cuts.
Investors await economic reports such as ISM Services PMI and monthly jobs report for further guidance.

The dollar index holds steady around 104 on Tuesday, hovering at its lowest levels in nearly two months as signs of economic weakness in the US support the case for Federal Reserve interest rate cuts. Data released on Monday showed that US manufacturing activity contracted further in May, despite market expectations for a slight improvement. This disappointing data has led to increased expectations for Fed rate cuts, with markets now pricing in around a 61% chance of a rate cut in September, compared with about 55% on Friday.

Investors are now eagerly awaiting more economic reports scheduled for release this week, including the ISM Services PMI, JOLTS Job Openings, and the highly anticipated monthly jobs report, for further guidance on the state of the US economy and the likelihood of Fed intervention.

In addition to domestic economic data, markets are also focused on the European Central Bank’s policy decision on Thursday, where it is widely expected to begin lowering rates. The dollar remains at multi-month lows against most major currencies, although it is only trading at two-week lows versus the aussie and yen.

The dollar index near 104 reflects growing concerns among investors about the strength of the US economy and the potential impact on Federal Reserve monetary policy. The anticipation of Fed rate cuts has weighed on the dollar, as market participants adjust their positions in response to evolving economic conditions and central bank actions.

Overall, the dollar index's proximity to two-month lows underscores the prevailing sentiment of cautiousness and uncertainty in the markets. Investors will closely monitor upcoming economic reports and central bank decisions for further insights into the direction of monetary policy and its implications for currency markets.

Also Read : BSE Index Plummets 6%, Worst Fall in Four Years Amid Uncertain Election Results

Also Read : US Stock Futures Dip as Traders Await JOLTS Report and Fed Rate Cut Speculations

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Dollar Index Hovers at Two-Month Lows Near 104 Amid Expectations of Fed Rate Cuts and Economic Weakn

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