Dollar Under Pressure: Is a 50 bps Rate Cut on the Horizon?

• US Dollar Dips as Federal Reserve Rate Cut Looms – Investors are bracing for a possible 50-basis-point rate cut at the Federal Reserves upcoming meeting.

• Oil Prices Climb on Hurricane Disruptions in the Gulf of Mexico – Crude oil production in the US remains hampered by Hurricane Francine, which has taken 12% of production offline.

Market Summary

The US Dollar Index continues to extend its losses, hovering near strong support levels ahead of the Federal Reserve's crucial monetary policy meeting this week. With market expectations leaning towards a rate cut, investors are closely watching the Fed's decision, as nearly 41% anticipate a 50-basis-point reduction, according to the CME FedWatch Tool. Despite slightly higher-than-expected US inflation, uncertainty lingers around the dollars outlook.

In commodities, gold prices surged to record highs amid growing expectations for a larger Fed rate cut and heightened market volatility. Reports of a second assassination attempt on Republican presidential nominee Donald Trump have further fueled demand for safe-haven assets.

The Dow Jones hit fresh record highs as investors anticipate a more aggressive Fed rate cut. Positive US economic data, including better-than-expected CPI and PPI figures, coupled with rising oil prices, have bolstered sentiment. In currency markets, the AUD/USD remains strong due to US dollar weakness. Meanwhile, GBP/USD and EUR/USD remain largely influenced by expectations surrounding central bank decisions this week.

Current rate hike bets on 18th September Fed interest rate decision:

Source: CME Fedwatch Tool

-50 bps (52%) VS -25 bps (48%)