Dollar Slides and Gold Rallies to a Record High on Fed Easing Prospects

Group 1: Dollar Index and Federal Reserve Actions - The dollar index (DXY00) fell by -0.27% on Monday 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 decline [1] - The US September Empire manufacturing survey fell to a three-month low of -8.7, which was 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 at the upcoming FOMC meeting, with an 82% chance of a second -25 basis point cut at the October 28-29 meeting [3] - Overall, markets anticipate a total rate cut of -68 basis points by year-end, bringing the federal funds rate down to 3.65% from the current 4.33% [3] Group 3: Euro Performance and ECB Outlook - The euro (EUR/USD) rose by +0.30% on Monday, driven by dollar weakness and hawkish comments from ECB Governing Council member Kocher, indicating the ECB is nearing the end of its rate-cutting cycle [4] - However, gains in the euro were limited by a significant drop in the German August wholesale price index and Fitch Ratings' downgrade of France's credit rating, which are both bearish for the euro [5] - Ongoing geopolitical tensions, particularly the continuation of the Russian-Ukrainian war, are also negatively impacting the euro [5]