According to DBS’ Senior FX Strategist Philip Wee, the DXY Index is likely to continue its retreat from the top of its three-week range between 100.5 and 101.9.
Wee predicts that the futures market may be misguided in expecting a larger 50 bps cut, as Fed Chair Jerome Powell’s recent comments at Jackson Hole were misinterpreted. Despite this, the S&P 500 Index has been on the rise, nearing its all-time high of 5670 after a significant drop in July and August.
Recent data shows a decrease in the US unemployment rate to 4.2% in August, along with a rise in CPI inflation excluding food and energy. Wee anticipates a 25 bps cut to 5.25-5.50% at next week’s FOMC meeting, with the Fed likely to outline a clear trajectory of rate cuts for the coming years.
Overall, investors should be prepared for a potential decline in the USD as the Fed takes steps to support the economy and maintain a strong labor market.
Analysis: In simple terms, the US Dollar is expected to weaken in the near future as the Federal Reserve looks to implement rate cuts to support the economy. This could have implications for investors and individuals alike, as it may impact the value of their investments and overall financial stability. It’s important to stay informed and consider the potential effects of these upcoming changes on your own finances.