Markets Anticipate Fed Rate Cut This Wednesday, While Fears Over US Growth Persist
The US dollar plummeted on Tuesday to its lowest level in four years against the euro, as investors confidently anticipate a rate cut by the Federal Reserve at its meeting on Wednesday. The European currency rose by 0.8% to $1.1853, its highest level since September 2021. Meanwhile, the dollar index, which measures the performance of the US currency against a basket of six major currencies, fell by 0.6% to 96.787 points, its lowest level since July 3. This selling pressure on the dollar comes after a period of relative stability in recent months, which followed a sharp correction at the beginning of the year. Analysts attribute this new weakness to the convergence of several factors: the widespread anticipation of a monetary easing by the Fed, repeated calls by President Trump for a more accommodative monetary policy, and recent disappointing labor market data. "The latest employment statistics, which show a more marked slowdown than expected, were the trigger for this selling movement," explains Marie Dupont, market strategist at Capital Finance. "Investors are now 85% convinced that the Fed will cut rates by at least 25 basis points on Wednesday." Fears about the solidity of US economic growth continue to weigh on the currency. The labor market is showing clear signs of weakness, while tariffs on imports are driving up consumer prices, creating a worrying stagflation environment. The Fed's meeting on Wednesday is being closely watched, with investors hoping for clear indications of the future trajectory of US monetary policy.
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