DXY to stay soft into FOMC – DBS
13.09.2024, 10:55

DXY to stay soft into FOMC – DBS

The DXY Index should continue to retreat from the top of its three-week range between 100.5 and 101.9, DBS’ Senior FX Strategist Philip Wee notes.

USD’s turn to fall lower ahead of next week’s FOMC meeting

“The futures market will likely be wrong in anticipating a larger 50 bps cut, reading too much into Fed Chair Jerome Powell’s remark at Jackson Hole that the Fed do everything it could to support a strong labour market as it made progress towards price stability. The S&P 500 Index has recovered to 5596, near its lifetime high of 5670, after its near-10% plunge over July 16-August 5 on fears that higher US joblessness heralded a US recession.” 

“The Fed has never described the labour market as weak; Powell reckoned it was time to lower rates to avert a further cooling in the labour market. The US unemployment rate eased to 4.2% in August from 4.3%, while CPI inflation excluding food and energy rose to 0.3% MoM from 0.2% over the same period. Yesterday, PPI core inflation also rose to 0.3% MoM from -0.2%.” “Today, the University of Michigan consumer survey will likely show 1Y inflation expectations staying unchanged at 2.8% in September after three months of declines. Hence, we expect the Fed to deliver a 25 bps cut to 5.25-5.50% next week. However, through its Summary of Economic Projections, the Fed should be more explicit than its counterparts regarding its multiple rate cut trajectory over 2025-2026 amid a soft landing, keeping the pressure on the greenback.”

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