Fed Rate Cut Expectations Weigh on Dollar
The United States Dollar (USD) has eased slightly from recent highs, with the Dollar Index (DXY) last seen at 98.82. Analysts Frances Cheung and Christopher Wong from OCBC note that the market’s attention is firmly on the upcoming Federal Open Market Committee (FOMC) meeting, where expectations of further monetary easing remain elevated.
The FOMC meeting, scheduled for 2:00 a.m. SGT, is the key event for markets. A 25 basis point rate cut is already fully priced in by investors. Analysts at OCBC continue to expect another back-to-back cut in December, followed by a further reduction in 2026.
Beyond monetary policy, geopolitical developments remain in focus. A meeting between the President of the United States and Chinese President Xi Jinping in Korea later this week is also on the radar, with markets watching closely for any signs of progress in trade relations.
The combination of softer inflation, corporate job cuts, and improved risk sentiment has left the United States Dollar vulnerable to further downside in the near term. However, strong technical support zones remain in place, which could limit the depth of any correction.
On the other hand, a decisive break above the resistance levels at 99.10 and 99.80 could revive bullish momentum, potentially pushing the DXY back toward the psychologically important 100.80 mark.
The DXY enters the FOMC meeting with a fragile tone, as markets brace for another rate cut and monitor geopolitical developments. While the easing cycle of the Federal Reserve is largely priced in, the tone of the accompanying statement and the outcome of the meeting between the President of the United States and President Xi will be critical in shaping the dollar’s trajectory into year-end.