Dollar Pressured by Fed Rate Cut Expectations

Group 1 - The dollar index (DXY00) decreased by -0.16% after bond yields fell due to a weaker-than-expected US August PPI report, reinforcing expectations for at least a 25 basis point rate cut by the Fed at the upcoming FOMC meeting [1][4] - The dollar's upside is limited by increased expectations for Fed easing through year-end and concerns over Fed independence, which may lead foreign investors to sell dollar assets [2] - The US final-demand August PPI rose by +2.6% year-on-year, down from +3.1% year-on-year in July, which was below the expected +3.3% year-on-year [3] Group 2 - Markets are currently pricing in a 100% chance of a -25 basis point rate cut and a 14% chance of a -50 basis point rate cut at the upcoming FOMC meeting on September 16-17 [4] - Following the anticipated -25 basis point cut at the September meeting, markets are discounting a 76% chance of a second -25 basis point cut at the October 28-29 meeting, leading to an overall -74 basis point reduction in the federal funds rate by year-end [4] Group 3 - The EUR/USD pair recovered by +0.15% after the dollar's retreat, influenced by the weaker-than-expected US August PPI report [5] - The euro faced initial pressure due to geopolitical risks in Europe, particularly after Poland shot down drones from Russia, which was labeled an "act of aggression" [5]