The US Dollar Index (DXY), tracking the greenback against six major currencies, hovered near 98.70 in Asian trading Wednesday as investors await the Federal Reserve’s pivotal rate decision. Markets now price in:
80% chance of a September rate cut (Reuters)
Potential follow-up cut in October
Fed expected to hold rates steady in June
Key Factors Influencing the Dollar
1. Weak US Economic Data Pressures USD
Tuesday’s disappointing reports weighed on the dollar:
Retail Sales fell 0.9% in May (vs. -0.7% forecast)
Industrial Production dropped 0.2% (vs. +0.1% expected)
2. Fed Rate Cut Expectations Grow
Traders will scrutinize the FOMC statement for clues on:
Timing of potential rate cuts
Fed’s outlook on inflation and growth
Impact of trade tensions and geopolitics
3. Geopolitical Risks Support Safe-Haven Demand
Ongoing Middle East tensions could bolster the USD:
Israel-Iran conflict escalates
Iran urges Gulf states to push for US ceasefire
Trump demands Iran’s “unconditional surrender”
What’s Next for the Dollar?
Fed’s dot plot & economic projections will shape USD outlook
Weak data strengthens case for 2024 rate cuts
Risk-off sentiment may counter dollar weakness
