Breaking News: US Dollar Rallies on New FOMC Statement, But Could September Rate Cut Be on the Table?
In a surprising turn of events, the US Dollar (USD) initially surged following the release of the latest FOMC statement. However, things took a dramatic turn when Chair Jerome Powell hinted at the possibility of a rate cut in September, causing the currency to plummet. This new development, along with the central bank’s focus on its dual mandate, has led to a shift in US short rates, according to ING’s FX strategist Chris Turner.
Analysis:
As the Fed’s terminal rate for the expected easing cycle hits a new low, the USD is expected to face further downward pressure. This could be good news for risk assets, but geopolitical tensions and weak manufacturing data in Europe and Asia are keeping growth-friendly currencies in check. As a result, the Japanese yen and the Swiss franc are emerging as the main beneficiaries of the softer USD environment.
Looking ahead, all eyes are on the upcoming US ISM manufacturing data, which could push the DXY towards recent lows near 103.65. Investors should stay alert and adjust their strategies accordingly to navigate these uncertain times in the financial markets.