The Federal Reserve’s expected rate cut has caused the DXY Index to reach 100.72, nearing December’s low of 100.62. Despite this, it remains above the low of 99.58 in July 2023, as highlighted by DBS Senior FX Strategist Philip Wee.
Analysis of the DXY Index Movement
Following Fed Chair Jerome Powell’s announcement at Jackson Hole regarding the need to adjust monetary policy, the focus has shifted from curbing inflation to supporting the labor market. Powell emphasized that the Fed is prepared to address any risks that may arise.
While short-term fluctuations in the DXY Index may occur based on upcoming US data, such as the PCE deflator on August 30, the outlook for the index trading below 100 in the medium term will be evaluated. The US monthly jobs report on September 6 is anticipated to have a significant impact.
In addition to the anticipated rate cut in September, the revisions to the Fed’s Summary of Economic Projections are expected to be crucial. In June, the Fed had projected 1-2 rate cuts in the second half of 2024, followed by a total of 200 basis points of cuts in 2025-2026.