The dollar slid to a two-month low on Monday, extending a downtrend from last week as traders reaffirmed their belief that U.S. rates have peaked and turned their attention to when the Federal Reserve could begin cutting rates. Markets have priced out the risk of further rate increases from the Fed after a slew of weaker-than-expected U.S. economic indicators last week, particularly after an inflation reading that came in below estimates. Focus now turns to how soon the first rate cuts could come, with futures pricing in a 30% chance that the Fed could begin lowering rates as early as March, according to the CME FedWatch tool.
“Market pricing for FOMC policy is likely to remain pretty steady, so the dollar should have very few catalysts to move it around this week,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA). “If we do see risk appetite improve again, then the dollar can definitely weaken further.”
