Sep 24 2024: The U.S. dollar held steady on Tuesday, while the euro showed signs of recovery following sharp losses in the previous session.
As of 04:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six major currencies, was mostly flat at 100.575, hovering just above a 12-month low.
Dollar Stabilizes After Recent Decline
The U.S. dollar found stability after last week’s selloff, triggered by the Federal Reserve’s decision to cut interest rates by 50 basis points.
With the Fed now in the midst of a rate-cutting cycle, market attention has shifted to how much further the central bank will reduce rates this year. According to the CME Group’s closely-watched FedWatch Tool, traders are betting on a 53% chance of another half-point rate cut at the Fed’s next meeting in November.
Fed Governor Michelle Bowman, who was the only dissenter to the size of last week’s cut, is expected to provide further insight in her remarks on Tuesday.
Later in the session, the release of the Consumer Board’s confidence index will be closely watched, but the main focus is on Friday’s core personal consumption expenditures (PCE) data, the Fed’s preferred inflation measure.
Euro Attempts Rebound After Sharp Drop
The euro, in the meantime, attempted a comeback, with EUR/USD rising 0.2% to 1.1135 after falling about 0.5% overnight. Monday’s data showed a significant contraction in eurozone business activity for the month.
The downturn was widespread, with Germany, the region’s largest economy, facing a deepening decline, while France, the second-largest economy, slipped back into contraction. After the European Central Bank cut rates for the second time this year, further economic weakness could increase the likelihood of another rate cut in October.
Meanwhile, GBP/USD traded flat at 1.3347, still close to its 2.5-year high hit last week after the Bank of England left interest rates unchanged.
“We don’t view GBP/USD positioning as particularly stretched, and with a potentially weaker dollar environment, the path forward likely leads towards 1.35,” ING analysts noted.
Yuan Strengthens on Chinese Stimulus
USD/CNY dropped 0.2% to 7.0356, its lowest level since May 2023, following China’s announcement of a range of stimulus measures that spurred hopes for an economic recovery in the region’s largest economy.
In Japan, USD/JPY climbed 0.6% to 144.51 after purchasing managers index data indicated a sustained decline in Japanese manufacturing activity, even as the services sector continued to grow. The Bank of Japan left interest rates unchanged last week, with expectations of steady growth in both inflation and the economy.
Elsewhere, AUD/USD slipped 0.2% to 0.6825 after the Reserve Bank of Australia kept interest rates steady, as expected, while reaffirming its commitment to combating stubborn inflation.
