The DXY fell to an eight-month low, falling by 0.2% to the lowest since January 2. This is due to increased chances of a larger Fed rate cut as well as China’s recent stimulus package.
Overnight-indexed swaps are now seeing more than a 50% chance that the Fed will cut interest rates by 50bps in November.
Increased sentiment in Asian markets, due to the stimulus measures, has dampened demand for the US dollar. The USDCNH has rallied past 7 for the first time in 16 months.
The stimulus package offered more funding and interest rate cuts, making it the most significant PBOC stimulus package since the early days of the pandemic. More fiscal help will be needed though to hit their 5% growth goal.
EURUSD is trading close to 1.12, holding gains brought about by US Dollar weakness from large Fed rate cut bets.
Sweden’s Riksbank followed widely anticipated predictions of a 25bps cut, lowering from 3.5% to 3.25%.
The Swiss Franc edged higher to 0.8480 as traders prepare for SNB’s interest rate decision tomorrow. The SNB is anticipated to cut interest rates by 25bps, making it the third straight 25bps rate cut for the bank.
France Consumer Confidence came out this morning at 95, slightly beating a 92 estimate.
Dovish remarks from BoE Governor Bailey led to slight Pound weakness, with EURGBP rebounding near 0.8345 this morning. US Dollar weakness led to Cable trading around 1.3350, trending toward its 31-month high of 1.3359.
Bailey’s comments suggested that the BoE will continue its easing policy over a longer period, with markets predicting interest rates could drop to 4.5% by the end of 2024 and toward 3.5% by the end of 2025.
Today, BoE Committee Member Megan Greene is delivering a speech on UK consumer spending.
