The dollar was set to end a three-day winning streak against the euro and the Swiss franc, as investors awaited a series of comments from Federal Reserve officials on the central bank’s current monetary policy. With the dollar hovering near levels seen prior to last week’s decision to initiate interest rate cuts, analysts noted that the central bank’s messaging pointed to growing concerns regarding the U.S. labor market as a significant determinant of future policy directions.
Bob Savage, head of markets macro strategy at BNY, remarked, “The lack of significant data until Friday’s core Personal Consumption Expenditures (PCE) inflation release leaves investors open to rethinking Fed rate cuts and the plan ahead.” Echoing this, St. Louis Federal Reserve President Alberto Musalem expressed support for the recent rate cut, designating it a precautionary measure aimed at safeguarding the job market. He added, however, that there might be “limited room” for additional cuts, given ongoing inflation above the Fed’s 2% target.
The dollar experienced a slight decline of 0.19% to 0.794 against the Swiss franc, signaling an end to three consecutive sessions of gains. On the latest front, newly appointed Fed Governor Stephen Miran found himself defending his stance as an independent policymaker after dissenting for a more aggressive 50-basis-point rate cut. Miran indicated he would present a more comprehensive argument for his position in an upcoming speech, suggesting that his dissent was a tactical gesture by the Federal Open Market Committee (FOMC) to unify its stance under Chair Jerome Powell while asserting the Fed’s institutional independence. This comes amidst criticism from U.S. President Donald Trump, who urged the Fed to implement more substantial interest rate cuts.
Market analysts predict that the current market movement reflects a moment of consolidation. “Today is more of a consolidating day,” noted Marc Chandler, chief market strategist at Bannockburn Forex in New York. “We had a strong dollar bounce after the FOMC meeting that has sort of stalled. I kind of thought we’d get a bit more of dollar gains ahead of the next batch of jobs data.” The upcoming week is deemed light in economic reports, yet it captured investor interest due to a diverse range of opinions within the FOMC, with many members scheduled to speak, including possibly a key address from Jerome Powell.
Meanwhile, the euro gained 0.23% to $1.1771, indicating a potential reversal after three consecutive days of losses against the dollar. The dollar index, which gauges the greenback’s strength against a basket of currencies like the yen and euro, fell by 0.24% to 97.49, also on track to break a streak of three daily gains. The Swedish crown advanced by 0.57% to reach 9.373 against the dollar ahead of the central bank policy meeting scheduled for Tuesday.
In further developments, the dollar dropped 0.05% to 147.87 against the Japanese yen, marking the second consecutive day of losses. A shift in rhetoric from the Bank of Japan had stirred expectations of a near-term rate hike but failed to invigorate the currency, with continued political uncertainty leading up to the Liberal Democratic Party leadership election on October 4 contributing to the Bank of Japan’s cautious approach towards further rate increases.
The British pound also gained against the dollar, rising 0.25% to $1.3499, as investors took a breath following a selloff driven by fiscal concerns from the previous Friday. Conversely, the Australian dollar saw a slight decline of 0.14% to $0.6582.
