Dollar Trades Near continued its downward trend in European trade on Thursday, sliding against a basket of major currencies and nearing three-week lows. This decline marks the dollar’s sixth consecutive session of losses, triggered by disappointing economic data that suggests a faster-than-expected slowdown in the US economy during the second quarter.
The Index
The dollar index, which measures the greenback against a basket of six major currencies, fell by 0.15% today to 105.17, after hitting a session high of 105.36. The index closed down by 0.3% on Wednesday
making it five consecutive losses and bringing it to a three-week low of 105.05.
Grim Data
Recent data has painted a bleak picture of the US economy. The private sector added only 150,000 new jobs in June, falling short of the estimated 163,000. Furthermore, the ISM services PMI contracted sharply to 48.8 in June
well below market expectations of 52.6, marking the first contraction in the services sector since January 2023.
US Rates
These economic indicators have increased the likelihood of rate cuts by the Federal Reserve. According to the FedWatch tool, the probability of a rate cut in September has risen to 73%, and the odds for a cut in November have climbed to 84%.
Fed’s Minutes
The Federal Reserve’s latest policy meeting minutes revealed heightened concerns among policymakers regarding the economic outlook and persistent inflation
which remains above the Fed’s target. Some members even suggested that if inflation does not decrease, further interest rate hikes might be necessary.
Conclusion
The US dollar’s decline reflects growing anxiety over the economic slowdown and the potential for interest rate cuts. Investors are closely monitoring these developments, as they could significantly impact market dynamics in the coming weeks.
FAQs
Why is the US dollar declining? The US dollar is declining due to disappointing economic data indicating a faster-than-expected slowdown in the US economy
which has increased the likelihood of rate cuts by the Federal Reserve.
What is the dollar index? The Dollar Trades Near index measures the value of the US dollar against a basket of six major currencies. It is a key indicator of the dollar’s strength in the global market.
How many jobs were added in June? The US private sector added 150,000 new jobs in June, which was below the estimated 163,000.
What is the ISM services PMI? The ISM services PMI is an index that measures the performance of the services sector in the US economy. A reading below 50 indicates contraction, while a reading above 50 indicates expansion.
What did the Federal Reserve’s minutes reveal? The minutes from the Federal Reserve’s latest policy meeting revealed concerns about the economic outlook and inflation. Some policymakers indicated that if inflation remains high, further interest rate hikes might be necessary.