Key points:
- Euro hits $1.12 for first time in 2024.
- Dollar sells off on bright rate cut outlook.
- What’s it going to be? 25bps or 50bps?
Greenback is about to get its interest rate slashed — Fed boss Powell said “time has come” for US central bank to adjust its policy.
- The
EURUSD pair crossed $1.12 for the first time this year as news out of the US knocked the valuation of the US dollar. The euro-dollar pair advanced to $1.1205 on Friday and remained well-bid Monday morning as forex traders digested the latest comments by Federal Reserve boss Jay Powell. The announcement markets were waiting for finally arrived — interest rates are going down. - ”The time has come for policy to adjust,” the top central banker said Friday in his keenly anticipated speech at the annual Jackson Hole symposium. “Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell said. “Supply constraints have normalized. And the balance of the risks to our two mandates has changed.”
- Against this backdrop, traders are now expecting a 100% chance of at least a 25bps cut to interest rates on September 18. Jobs data on deck for the first Friday of the new month will help policymakers decide whether to bump that figure up to a juicier 50bps cut. Chances of a half-a-percent cut to rates rose to 35%, up from 28% before Powell’s speech. Low rates are generally bad for the US dollar as they make it yield less.
