The US dollar hovers near the year's low, traders closely monitor clues of a Fed rate cut
The US dollar against a basket of currencies has remained at its lowest level in over a year, with the market focusing on clues to the Fed's rate cut next month. Analysts say the likelihood of a rate cut has risen to 36%, and predict that it may cut rates by over 100 basis points before the end of the year. The Australian dollar has risen to an eight-month high due to domestic inflation slowing down, while Bitcoin has dropped over 4% after falling below $60,000. The US dollar index has slightly risen, hovering near its recent 13-month low
Zhītōng Cáijīng APP noticed that on Wednesday, the US dollar against a basket of currencies remained near its lowest level in over a year, the pound slightly below multi-year highs against the US dollar, with the market focusing on clues to the widely expected rate cut in the US next month.
Cryptocurrency Bitcoin became the focus of the Asian market, falling more than 4% after breaking below the support level of around $60,000.
The Australian dollar rose to an eight-month high against the US dollar, with previous data showing that domestic inflation in Australia slowed to a four-month low in July, but the overall progress in curbing price increases was disappointing.
Charu Chanana, foreign exchange strategy director at Shèngbǎo Bank, said: "The Reserve Bank of Australia is unlikely to shift at the September meeting, which could add another layer of strength to the Australian dollar in the short term, while the periodic weakness of the US dollar and stable global economic growth."
Elsewhere, the overall trend in the foreign exchange market was relatively mild, with traders waiting for new clues about the condition of the world's largest economy.
Investors unanimously believe that the Federal Reserve will begin cutting interest rates next month. Last week, Federal Reserve Chairman Powell's stance was relatively moderate. The current focus of debate is whether the Fed will cut rates significantly by 50 basis points.
According to the Chicago Mercantile Exchange Group's FedWatch tool, current pricing shows a 36% chance of further rate cuts, up from 29% a week ago.
The market has fully priced in the expectation of a 25 basis point rate cut next month, with the Fed expected to cut rates by over 100 basis points by the end of the year.
The initial estimate of US GDP for the second quarter will be released later this week, along with the inflation indicator favored by the Fed - the core Personal Consumption Expenditures (PCE) index.
However, Matt Simpson, Senior Market Analyst at City Index, said that as attention shifts from inflation to economic strength, the importance of this week's personal consumption expenditure data is "debatable."
"A strong upside surprise is needed to dispel expectations of multiple rate cuts by the Fed."
The US Dollar Index, which measures the dollar against a basket of currencies, recently rose by 0.2% to 100.78, hovering above the 13-month low of 100.51 touched in the previous trading day.
This month, the US dollar has fallen by 3.4%, on track for its largest monthly decline since November 2022.
However, Simpson stated that given the market has been digesting the accommodative policies since September for several weeks, the downward momentum of the dollar seems to be weakening, with support established around 100.18 - 30