Dollar continues to weaken ahead of Fed policy decision
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Daily Currency Update
The US dollar continues to weaken over the last 24 hours ahead of tomorrow evening's crucial policy decision by the US Federal Reserve. There is growing market conviction that the Fed will initiate its first easing cycle since the pandemic with a 50bp rate cut. Recent US employment data has indicated a slowing economy, with the last two Non-Farm Payroll reports missing expectations after months of outperformance. If the Fed implements a 50bp cut, further dollar weakness could follow after the decision. However, a more conservative 25bp cut may see the dollar regain some of its losses.Key Movers
Yesterday's data saw a better-than-expected Empire State Manufacturing Index. Manufacturers in New York State provided more positive responses compared to recent months, with the index posting a reading of 11.5, significantly above the expected -4.1 and marking the first positive reading since November 2023. Later this morning, the monthly German ZEW Economic Sentiment reading will be released, followed by this afternoon's US Retail Sales data for August, the final top-tier data point before tomorrow's Fed decision. There is little noteworthy data from the UK today, but tomorrow morning brings the latest inflation reading, with CPI expected to remain at 2.2% month-over-month. EUR/USD has edged up to 1.1135; GBP/USD has risen to around 1.3215, with GBP/EUR also higher at 1.1865.Expected Ranges
- GBP/USD: 1.3160 - 1.3300 ▲
- GBP/EUR: 1.1825 - 1.1910 ▲
- GBP/AUD: 1.9470 - 1.9620 ▼
- EUR/USD: 1.1095 - 1.1200 ▲