Dollar slipped as markets await Fed Rate decision and Trump is pushing for bigger cuts.
NaijaOnPoint Nigeria reports that the U.S. dollar weakened on Monday as investors positioned ahead of this week’s Federal Reserve policy meeting, where interest rate cuts are expected to resume, and as former President Donald Trump renewed calls for more aggressive monetary easing.
In a social media post, Trump urged Fed Chair Jerome Powell to deliver a “bigger” cut to benchmark interest rates, citing pressures in the housing market. His comments came just before the Federal Open Market Committee (FOMC) meeting scheduled for September 16–17.
Markets have fully priced in a 25-basis-point cut, with the CME FedWatch Tool showing a slim 5% chance of a deeper 50-basis-point move.
“What we see is just a broad-based lack of conviction, with traders relatively happy to sit on the sidelines and wait until the outcome of Wednesday’s FOMC meeting is known,” said Michael Brown, market analyst at Pepperstone in London. He noted that squaring of positions is likely to drive short-term moves until the decision is announced.
Dollar Index Retreats
The dollar index (DXY), which tracks the greenback against six major peers, fell 0.4% to 97.273, its lowest level in nearly a week. Against the yen, the dollar slipped 0.2% to 147.34, while the euro rose 0.3% to $1.1771.
Although the dollar has steadied following a record slide earlier this year, analysts still view the U.S. currency as locked in a bearish trend. Investors will closely parse the Fed’s updated “dot plot” and Powell’s press conference for clues on how far and how fast easing might go.
Nomura analysts said in a Monday note that the Fed is likely to emphasize that the upcoming move is an “insurance” cut, with any further easing to remain gradual.
Other Central Bank Moves
Markets are also watching policy meetings in Japan, Britain, Canada, and Norway this week. Both the Bank of England and the Bank of Japan are expected to hold rates steady, with investors focusing instead on the BoE’s plans to slow bond sales and on signals from the BOJ regarding possible hikes later this year.
Euro Steady Despite France Downgrade
The euro held firm despite Fitch Ratings’ downgrade of France’s sovereign credit rating late Friday, stripping the eurozone’s second-largest economy of its AA- grade over rising debt concerns.
Analysts said the downgrade was largely priced in, limiting its immediate market impact. “Fiscal worries in France could cap euro gains in the near term, but are unlikely to drive a meaningful decline,” said Nick Rees, head of macro research at Monex Europe.
Data shows speculative net long euro positions rose to $18.4 billion as of September 8, near a two-year peak. Analysts say the euro’s resilience is supported by expectations of Fed easing and reduced prospects of further cuts from the European Central Bank.