The US Dollar dropped to its lowest level in over two months against the Pound and Euro, and hit a 10-month low versus the Australian Dollar on Tuesday, as investors increasingly priced in a Federal Reserve rate cut this week.
The Dollar index, which measures the currency against six major peers, fell to 97.121, marking its lowest point since 7th July, amid renewed calls from President Donald Trump for aggressive monetary easing.
Markets are pricing in a 25-basis-point rate cut on Wednesday, with rapidly weakening labour market data driving the recent surge in expectations for monetary easing, Reuters reports.
On Monday, Trump urged Fed Chair Jerome Powell via social media to implement a “bigger” rate cut, citing concerns about the housing market.
Attention is firmly on the Fed meeting on Wednesday, with markets closely watching the tone set by Chair Powell.
If Powell highlights inflation risks or signals uncertainty about the growth and inflation outlook, the market may scale back some of its expectations for a rate cut.
Elsewhere, the Pound gained 0.2% to $1.3627, reaching its highest level since 8th July.
Tuesday’s data indicated that the UK labour market has slowed slightly, which could help ease the Bank of England’s concerns about ongoing inflationary pressures.
Figures from the Office for National Statistics showed that payroll numbers have declined for the seventh consecutive month, while private-sector basic wage growth, a key metric for the Bank of England, slowed to 4.7% between May and July, down from 4.8% in the three months to June.
The Bank of England is widely expected to maintain interest rates this week, following a cut in August.
Furthermore, the Euro climbed up to 0.3% against the softening Dollar, reaching $1.1797, its highest level since 3rd July.
The Australian Dollar dipped 0.06% to $0.6666, after earlier rising to $0.6677, its strongest level since 8th November.
Against the Yen, the Dollar fell 0.3% to 146.920 ahead of the Bank of Japan’s policy meeting on Friday, as markets anticipate the central bank will maintain rates at 0.5%.