US Dollar Index Touches 100.9 after Comments by Fed Powell on Gradual Interest Rate Cuts

The US Dollar Index (DXY) rose after Federal Reserve Chairman Jerome Powell said that it will lower interest rates “over time.” Therefore, yet again, the DXY – an index that measures the value of USD against six major currencies, is higher for the second consecutive day – hovered around 100.80 during the Asian session on Tuesday.

Powell also insisted that the U.S. central banking system is not eager to decrease rates and future steps will be moderate. He also mentioned that the recent cut in 50 basis points is not a sign that more frequency cuts will be implemented and suggesting moderation in coming decisions.

The only piece relevant in the current decisions at FOMC is found in the CME FedWatch Tool which sees a 61.8% likelihood of a 25 BPS rate cut in the next FOMC meeting. Probability for more profound 50 bp cut has declining to 38.2% as compared to 53.3% previously for the current day.

Nevertheless, the potential rate cut was supported by last week’s US Core Personal Consumption Expenditures (PCE) Price Index figure, which records inflation and increased merely by 0.1% month-over-month in August against the expected 0.2%. This is because as of the Feds consideration, inflation is easing hence the possibility of further rate cuts.

US traders are also focusing on US ISM Manufacturing PMI that is expected to marginally bounce up to 47.5 in September from a readout of 47.2 in the prior month. From this report, it is easier to have a clue of what the current position of the US manufacturing sector looks like.