FX.co ★ Dollar Set for Third Straight Weekly Decline

The dollar index remained near its two-month lows at approximately 98.3 on Friday, marking its trajectory towards a third consecutive weekly decline. This movement followed the Federal Reserve's anticipated interest rate cut, accompanied by a less aggressive stance than the markets had predicted. Federal Reserve Chair Jerome Powell suggested that additional rate increases are improbable, with projections within the Fed indicating only one rate reduction next year. Additionally, the Fed announced its intention to purchase short-dated Treasury bills to bolster market liquidity, a move that has pushed yields lower and exerted downward pressure on the dollar. Concurrently, initial jobless claims experienced their most significant increase in nearly four and a half years last week, further supporting a dovish rate outlook. In contrast, hawkish shifts in interest rates are re-pricing in other major economies such as Australia, Canada, and Europe, contributing to the downward pressure on the U.S. dollar. This week, the dollar is expected to weaken against most major currencies, with the sharpest decline anticipated against the euro.