NEW YORK, Sept 19 (Askume) – The U.S. dollar fell slightly in volatile trading on Wednesday as expectations grew that the Federal Reserve would cut interest rates by a sharp 50 basis points and adopt an accommodative monetary policy stance.
In the days before the Fed’s action on Wednesday, investor expectations had shifted largely to a dovish stance, with money markets pricing in a 65% chance of a 50 basis point (bp) rate cut. But economists polled by Askume favor a 25 basis point cut.
“The initial explanation for the decision was that it was a loose stance, although overall there was little chance of that happening,” said Eugene Epstein, head of North America trading and structured products at Moneycorp in Boston.
The US dollar index, which measures the greenback’s value against its six peers, fell 0.069% to 100.950 after reversing early gains. It hit a more than one-year low of 100.21 on the previous trading day.
The euro strengthened to $1.111950, but remained below the previous session’s three-week high.
USD/JPY rose 0.45% to 142.895.
“By the end of the day, everything has basically been turned upside down, so you could argue that you believe the rumors, you believe the facts. A more comfortable situation exists,” Epstein said.
The money market expects rates to be cut by 72 basis points in 2024 and by 192 basis points by September 2025.
Data released by the Labor Department on Thursday showed that the number of people applying for unemployment benefits unexpectedly fell by 12,000 last week, indicating that the labor market has improved.
Federal Reserve policymakers projected on Wednesday that the benchmark interest rate will fall by half a percentage point by the end of this year, a full percentage point next year and half a percentage point by 2026.
The pound rose to its highest level against the dollar since March 2022 after the Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to keep interest rates steady . GBP/USD rose 0.30% to $1.32540, having previously been at $1.3314.
The Australian and New Zealand dollars found support on unexpected domestic data results.Australia ‘s employment rate in August exceeded expectations for the third consecutive month.
The Australian dollar rose 0.56% to $0.68020.
At the same time, data showed that New Zealand’s economy shrank by 0.2% in the second quarter and the New Zealand dollar rose by 0.42% to $0.62335.
