Sep 25 2024: The U.S. dollar continued its decline on Wednesday, extending losses from the previous session, while the euro gained despite ongoing signs of economic challenges in the eurozone.
At 04:00 ET (09:00 GMT), the Dollar Index, which measures the dollar’s performance against six major currencies, dropped 0.1% to 100.080. This follows a 0.5% drop in the previous session, marking its largest one-day fall in a month.
Dollar Weakens Further
The U.S. dollar has struggled since the Federal Reserve began its rate-cutting cycle earlier this month with a significant 50 basis-point reduction.
On Tuesday, data revealed an unexpected decline in U.S. consumer confidence for September, raising concerns about potential slower growth in the U.S. economy, especially as the labor market shows signs of softening.
“Consumer confidence came in much weaker than expected yesterday, surprising the market,” noted analysts at ING. “This is significant because U.S. consumers have been incredibly resilient for a long time.”
Market expectations for a 50 basis-point rate cut at the Fed’s next meeting have now risen to 59.5%, up from 37% a week ago, according to the CME FedWatch tool.
Euro Approaching 13-Month High
The EUR/USD pair edged up by 0.1% to 1.1188, hovering near a 13-month high reached last month. The euro has benefited from dollar weakness, despite ongoing concerns over the eurozone’s economic performance.
“There’s little on the European agenda today, so range trading in EUR/USD seems likely. However, holding above 1.1100 is encouraging for bullish EUR/USD traders,” added ING. Meanwhile, GBP/USD slipped by 0.1% to 1.3394, pulling back from its highest levels since March 2022.
The British pound has been supported by expectations that the Bank of England will take a less aggressive approach to rate cuts compared to the Federal Reserve. Comments from the Bank of England’s Megan Greene later in the session will be closely watched for further indications of monetary policy direction.
Mixed Performances Across Other Currencies
USD/SEK edged up by 0.1% to 10.1041, ahead of Sweden’s Riksbank meeting, where a 25 basis-point rate cut is expected. However, Riksbank Governor Erik Thedeen has not ruled out the possibility of a larger 50-basis-point cut.
The Chinese yuan, USD/CNY, dropped 0.1% to 7.0238, nearing its lowest level since May 2023 after Beijing announced new stimulus measures, including cuts to banks’ reserve requirements and lower mortgage rates.
USD/JPY climbed 0.4% to 143.81, while AUD/USD slipped 0.2% to 0.6878, just below a 19-month high. On Wednesday, Australia’s Consumer Price Index data showed inflation hitting a three-year low in August, though core inflation remains more persistent. The Reserve Bank of Australia left interest rates unchanged on Tuesday, indicating that inflation is expected to reach its target range by 2026.
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