Dollar Weighed Down by Fed Rate Cut Expectations

Group 1: Dollar Index and Federal Reserve Actions - The dollar index (DXY00) is down by -0.11% due to expectations of a -25 basis point cut in the fed funds target range at the upcoming FOMC meeting [1] - The S&P's rally to a new record high has reduced liquidity demand for the dollar, contributing to its losses [1] - The US September Empire manufacturing survey fell to a three-month low of -8.7, significantly weaker than the expected 5.0, further pressuring the dollar [3] Group 2: Market Expectations and Rate Cuts - Markets are pricing in a 100% chance of a -25 basis point rate cut and an 8% chance of a -50 basis point cut at the FOMC meeting [4] - Following the anticipated -25 basis point cut, there is an 89% chance of a second -25 basis point cut at the October 28-29 meeting, leading to an overall -70 basis point reduction in the federal funds rate by year-end [4] Group 3: Euro Performance and ECB Policy - The euro (EUR/USD) is up by +0.17% due to dollar weakness and hawkish comments from ECB Governing Council member Kocher, indicating the ECB is nearing the end of its rate-cutting cycle [5] - However, gains in the euro are limited by a significant drop in the German August wholesale price index and Fitch Ratings' downgrade of France's credit rating, which are dovish factors for ECB policy [6] - Ongoing concerns regarding the Russian-Ukrainian war are also negatively impacting the euro, as negotiations are currently on "pause" [6]