The US Dollar opened lower today and after a bit of a consolidation during the Asian session, started to depreciate again in the European session.
The Moody's downgrade is cited as the culprit although there are also other drivers. One above all is that the market has repriced interest rates expectations for the Fed to reflect the central bank's base case of two cuts in 2025. Therefore, we would need stronger reasons to price out the remaining cuts.
We had some upside in the greenback following the higher inflation expectations in the UMich survey last Friday but those gains didn't last for long.
The only bullish scenario for the dollar now is that we get strong economic data or more hawkish Fed comments, so that the remaining rate cuts get priced out and give the greenback another short-term boost.
As long as better global growth remains the main driver, the USD should keep on depreciating against its peers, but if inflation starts to become a concern, then we will likely see more upside for the dollar.
This article was written by Giuseppe Dellamotta at www.forexlive.com. Read More Details
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