What’s going on here?

The US dollar is holding near its lowest level in over a year as traders wait for signals of possible US interest interest rate cuts.

What does this mean?

The dollar index rose slightly to 100.61, staying just above its 13-month low of 100.51. Despite this slight uptrend, the dollar is down 3.4% this month, marking its biggest monthly decline since November 2022. As traders focus on the Federal Reserve’s upcoming interest rate decision, expectations for a 50 basis point cut have risen to 36% from 29% last week, according to CME Group’s FedWatch tool. Markets have priced in a 25 basis point cut and are expecting more than 100 basis point rate cuts by year-end.

Why should I care?

For markets: Keep the currency flow under control.

The dollar’s move is not an isolated case – it is affecting other currencies as well. The pound sterling fell slightly to $1.32585, having hit its highest since March 2022. The euro edged down marginally by 0.05% to $1.117825, near its 13-month high, while the yen fell to 144.225 per dollar. The Australian dollar, meanwhile, remained at around $0.6791, near its one-month high. Bitcoin also took a hit, initially losing over 6% and trading 4.37% lower at $59,137.00. These fluctuations indicate market sentiment regarding impending rate cuts.

The overall picture: Economic indicators in focus.

All eyes are on the key economic data to be released this week, including the US second-quarter GDP estimate and the preferred inflation Indicator, the private consumption expenditure index. A senior market analyst at City Index believes that only a significant positive surprise on these data points could change expectations regarding Fed rate cuts. Currently, the market is already expecting several rate cuts to ease economic pressure.