Home / Business and Economy / Dollar Dives on Weak US Data, Fed Cut Hopes Soar
Dollar Dives on Weak US Data, Fed Cut Hopes Soar
27 Nov
Summary
- Dollar index drops due to weaker-than-expected US retail sales and PPI data.
- Falling bond yields and decreased consumer confidence further weaken the dollar.
- Markets anticipate an 80% chance of a Fed rate cut in December.
The dollar has weakened considerably, with the dollar index sliding by 0.35% following a string of disappointing US economic reports. September retail sales and core producer price index figures came in below forecasts, increasing the likelihood of an imminent Federal Reserve interest rate cut. This sentiment was amplified by a sharp drop in the 10-year Treasury note yield to a 3.5-week low of 4.002% and a more-than-expected fall in consumer confidence.
Consumer confidence in November plummeted to a seven-month low, signaling underlying economic concerns. While some data points, like pending home sales, showed a positive uptick, the overall economic picture painted by retail sales, PPI, and consumer sentiment has shifted market focus towards monetary policy easing. Traders are now discounting an 80% probability of a 25 basis point rate cut by the Federal Open Market Committee at its upcoming December meeting.
In currency markets, the euro saw gains against the weakening dollar, supported by a rise in Eurozone new car registrations and speculative hopes for a peace deal in Ukraine. Meanwhile, the Japanese yen climbed as concerns about potential government intervention to support the currency emerged, alongside the supportive decline in US bond yields.
