US Dollar Index weakens below 99.0 on rising Fed rate cut bets
- US Dollar Index weakens to around 98.90 in Monday's early Asian session.
- Analysts expect a 25 basis points rate cut at the December meeting on Wednesday.
- US Consumer Sentiment rose for the first time in five months
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a negative note near 98.90 during the Asian trading hours on Monday. The growing expectations that the US Federal Reserve (Fed) will deliver a rate cut in the December policy meeting weigh on the DXY.
Markets expect a rate cut from the US central bank on Wednesday due to recent softer US economic data and moderating inflation reports. Fed funds futures traders are now pricing in nearly an 90% chance of a rate reduction in the December meeting, up from 71% probability a week ago, according to the CME FedWatch Tool.
Traders will closely monitor the press conference from Fed Chair Jerome Powell, which might offer some hints about the US interest rate path. Any hawkish comments from the Fed officials could provide some support to the DXY in the near term.
On the other hand, the upbeat US economic data could help limit the US Dollar’s losses. The University of Michigan’s US Consumer Sentiment Index rose to 53.3 in December from a final reading of 51.0 in November. This figure came in stronger than the estimation of 52.0.
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