The US Dollar Index (DXY), which gauges the USD’s value against six major currencies, has retraced recent gains, trading around 100.80 during Asian hours. This movement comes ahead of the Federal Open Market Committee’s (FOMC) monetary policy meeting scheduled for Wednesday.
The decline in the US Dollar may be linked to improved risk sentiment and the growing expectation that the Federal Reserve (Fed) will announce a significant 50 basis point rate cut later today.
According to the CME FedWatch Tool, there is a 37.0% chance of a 25-basis-point rate cut, while the probability of a 50 basis point cut has increased to 63.0%, up from 62.0% the previous day.
Despite this, the US Dollar Index gained momentum following the release of stronger-than-expected US Retail Sales data on Tuesday. Retail sales increased by 0.1% month-over-month in August, rebounding from a revised 1.1% rise in July and surpassing expectations of a 0.2% decline. This suggests robust consumer spending. Additionally, the Retail Sales Control Group rose by 0.3%, slightly below the previous month’s 0.4% increase.
On Tuesday, JP Morgan CEO Jamie Dimon commented that whether the Fed implements a 25 or 50 basis point rate cut, the impact would be “not earth-shattering.” Dimon noted that while these adjustments are necessary, they are relatively minor in the context of the broader economy, emphasizing that “there’s a real economy” beyond the Fed’s rate changes, as reported by Bloomberg.
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