The dollar retreated from nearly seven-week highs against major currencies on Tuesday as investors evaluated the potential for interest rate cuts in the U.S. This decline occurred despite ongoing tensions in the Middle East, which have bolstered the dollar’s appeal as a safe-haven asset.
The euro rose slightly by 0.1% to $1.098575, remaining close to last week’s seven-week low of $1.09515, while the pound also gained 0.1%, reaching $1.31005 after hitting a three-week low of $1.30595 on Monday.
Market expectations regarding U.S. Federal Reserve monetary easing have shifted significantly in recent days. A robust jobs report released last week supported Fed Chair Jerome Powell’s assertion that the central bank would likely continue with its customary quarter-percentage-point rate reductions, following a substantial cut in September. Nick Rees, a senior FX market analyst at Monex Europe, noted that the dollar’s recent adjustments are influenced by the belief that the Fed is unlikely to implement a 50-basis-point cut in the near future. He also stated, “We’re no longer worried about the U.S. dropping into recession this year.”
Further reinforcing this sentiment, John Williams, President of the Federal Reserve Bank of New York and a permanent voting member of the Fed’s rate-setting committee, echoed Powell’s stance in a Financial Times interview. Williams indicated that the September cut should not be seen as a precedent for future actions, suggesting a more cautious approach in the Fed’s monetary policy going forward.
- Tags: Dollar dips, Fed rate, Market, US federal reserve, US rate
