Dollar at Seven-Week Low: Expectations of a Larger Fed Rate Cut

The dollar fell to its lowest level in seven weeks on Tuesday. Investors anticipate that downward revisions to US employment data could reveal weakness in the labor market, potentially accelerating Fed interest rate cuts.

The dollar fell 0.2% against the yen to 147.21. The pound traded at $1.3558, and the euro at $1.1752. The dollar index fell to its lowest level since the end of July, reaching 97.25.

Economists predict that employment data could be revised downwards by 800,000 people. This could indicate that the Fed is behind its “maximum employment” target.

While markets have fully priced in the expectation of a 25 basis point interest rate cut, the probability of an aggressive 50 basis point move has risen to 12%.

Increased expectations of interest rate cuts have pushed gold prices to a record high of $3,659 per ounce.

Political developments are also in the focus of the markets: The resignation of Japanese Prime Minister Shigeru Ishiba, the dismissal of François Bayrou in France, and the sudden change of finance minister in Indonesia have attracted attention.

Despite these fluctuations, analysts do not expect serious pressure on the euro.

The European Central Bank is expected to keep interest rates unchanged this week. Meanwhile, the Indonesian rupiah depreciated by 0.8% following a change in the finance minister, and the central bank resorted to bond purchases to stabilize the market.