The Ultimate Guide to the Latest Forex Market Trends: U.S. Dollar Holds Near Year-Low As Traders Await Interest Rate Cut
By Brigid Riley
Are you ready to capitalize on the latest forex market movements? The U.S. dollar is holding steady near its lowest point in over a year against a basket of peers, while sterling is trading close to multi-year highs. All eyes are on the upcoming U.S. interest rate cut next month, with investors eager for clues on its size.
Cryptocurrency enthusiasts were in for a surprise as bitcoin dropped over 6% after breaking below the $60,000 support level. However, overall activity in the forex market remained subdued as traders awaited fresh signals on the state of the global economy.
Investors are placing their bets on the Federal Reserve starting interest rate cuts next month, following Chair Jerome Powell's recent dovish stance. The big question now is whether the rate cut will be a massive 50-basis point move. Current predictions suggest a 36% chance for the larger cut, up from 29% just a week ago.
Market expectations are already factoring in a 25-basis point cut next month, with over 100 basis points of easing expected by the end of the year. The upcoming U.S. GDP estimate for the second quarter and the personal consumption expenditures (PCE) index will provide further insights into the economy's health.
Despite the focus on inflation, the importance of this week's PCE data is up for debate. According to Matt Simpson, a senior market analyst at City Index, a strong positive surprise will be needed to change the current expectations of multiple Fed cuts.
The U.S. Dollar Index, which measures the dollar against a basket of currencies, is currently slightly higher at 100.61, above a 13-month low. The dollar has dropped 3.4% this month, on track for its largest decline since November 2022.
While downside momentum on the dollar seems to be slowing down, support levels are holding steady around 100.18/30. Sterling dipped slightly after reaching a high against the dollar, while the euro remains close to a 13-month peak.
As for other currencies, the yen has retreated from its recent high against the dollar, and the Australian dollar is stable ahead of key inflation data. In the cryptocurrency world, bitcoin has experienced a significant drop, shedding over 6% in a single trading session.