Dollar Slips and Gold Posts a Record High on Fed Rate-Cut Prospects

Core Viewpoint - The dollar index is experiencing downward pressure due to expectations of easier Federal Reserve policy, with a potential interest rate cut of 50 basis points anticipated this year [1][2]. Group 1: Federal Reserve Outlook - The dollar index (DXY00) fell by -0.12% from a one-week high, influenced by the outlook for easier Fed policy [1]. - The FOMC is expected to cut interest rates by another 50 basis points this year, with a 92% chance of a -25 basis point cut at the next meeting on October 28-29 [4]. - St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic expressed limited room for further rate cuts due to elevated inflation concerns [3][4]. Group 2: Market Reactions - The euro is gaining support from the dollar's weakness, with EUR/USD rising by +0.19% [4]. - Fitch Ratings upgraded Italy's sovereign credit rating, which positively impacted the euro [4][5]. - The Eurozone's September consumer confidence index rose by +0.6 to -14.9, exceeding expectations [5]. Group 3: Currency Movements - The USD/JPY pair decreased by -0.03%, with the yen recovering from a two-week low due to a weaker dollar [6]. - Higher Japanese government bond yields, reaching a 17-year high of 1.670%, have strengthened the yen's interest rate differentials [6].