Dollar strengthens amid Fed expectations

18 Sep 2024 , 11:15 AM

Stronger-than-expected U.S. retail sales on Wednesday caused traders to slightly reduce their wagers that an excessive interest rate decrease will kick off the country’s easing cycle. Despite this, the dollar remained stable.

At 1800 GMT, the Federal Reserve is anticipated to announce its first interest rate reduction in almost four years. A press conference is scheduled to take place thirty minutes afterward.

Since July, the dollar has dropped along with U.S. yields, and at $1.1119 per euro, it is not far off the lowest point of the year, $1.1201, as speculators bet on easing at a clip, with rate cuts of more than 100 basis points priced in by Christmas.

It traded at 142.02 yen early on Wednesday, capping a significant week for the currency pair that culminated with central bank meetings in Japan and the United States on Friday. On Monday, during a holiday-shortened Asia session, it dropped below 140 yen for a brief period of time.

Against forecasts of a 0.2% decline, August retail sales in the US increased by 0.1%, according to figures released tonight.

Following the data, the frequently watched GDPNow estimate from the Atlanta Fed increased from 2.5% to 3%. Interest rate futures indicate a 63% possibility of a 50 basis point decrease, having flirted with 70% the day before. This indicates that a rate cut is fully priced.

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