The dollar is trading near its lowest point against the euro and sterling in over a year, driven by a dovish Federal Reserve and concerning data on the U.S. job market. This has raised expectations for interest rate cuts in the near future.
As U.S. Treasury yields decline, the dollar fell below the 145 yen mark. Market participants are closely watching for the weekly jobless claims data and Fed Chair Jerome Powell's upcoming speech at the Jackson Hole symposium on Friday.
The Dollar Index, which measures the currency against major peers, remains stable at 101.14, with the euro hovering around $1.1154 and sterling at $1.3092. Fed officials have indicated a strong inclination towards a rate cut at their September meeting, with the possibility of an immediate reduction.
Traders are now pricing in a 38% probability of a 50 basis point cut and a 62% chance of a 25 basis point reduction in September. Powell's speech at Jackson Hole is eagerly awaited for further insight into the Fed's future monetary policy decisions.
Analysts are leaning towards a 25 basis point cut, citing the current health of the U.S. economy. The dollar slipped to 145.09 yen, with focus also on Japanese monetary policy and upcoming testimony from Bank of Japan officials.
Overall, the market sentiment is shifting towards expectations of lower interest rates, which could have significant implications for currency markets and investor portfolios. Stay tuned for further developments and market reactions to central bank decisions.