As the world's best investment manager, I bring you the latest news from the financial markets. The U.S. dollar fell on Monday, while the euro and sterling gained ground. This movement comes ahead of the expected start of a rate-cutting cycle by the Federal Reserve later this week.
At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower to 100.357.
Large Fed Cut Expected
The Federal Reserve concludes its latest policy-setting meeting on Wednesday and is widely anticipated to start cutting interest rates from the 5.25%-5.5% range that has been in place for the last 14 months. This reduction in rates has been signaled by Fed officials, with the U.S. dollar falling to its lowest level since February 2021.
However, there is still uncertainty over the size of the cut, with speculation that the Fed could deliver a hefty 50-basis-point interest rate cut. Fed fund futures are indicating a 59% chance of a 50-basis point cut at the September meeting.
U.S. Treasury yields have retreated in anticipation of the cut, with benchmark 10-year yields down 30 basis points in about two weeks. The Fed's rate decision will be followed by a press conference where Chairman Jerome Powell could provide hints about the further outlook for rates and the economy.
Euro and Sterling Soar
In Europe, the euro traded 0.4% higher to 1.1115, despite the European Central Bank cutting interest rates by 25 bps last week. ECB President Christine Lagarde has dampened expectations for another rate reduction next month.
Sterling also climbed 0.4% to 1.3173 ahead of the Bank of England's policy-setting meeting on Thursday. The central bank is expected to hold its key interest rate at 5% after a 25-bp reduction in August.
Yen Strengthens Ahead of BOJ Meeting
The yen rose 0.8% against the dollar to 139.76, reaching an over eight-month high ahead of the Bank of Japan's interest rate decision on Friday. The BOJ is expected to keep the short-term policy rate target steady at 0.25%.
Overall, these movements in the currency markets are driven by central bank decisions and economic outlooks. As an investor, it is crucial to stay informed about these developments and consider how they may impact your investments and financial decisions. Whether it's the Fed's rate cuts, ECB's policy decisions, or BOJ's interest rates, understanding the implications of these events can help you navigate the markets effectively.