Asian session review: US dollar is showing negative dynamics

During today's Asian trading, the US dollar resumed its decline against major currencies after yesterday's moderate increase, while investors are cautious ahead of tomorrow's publication of US inflation data.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.18% to 100.91. Yesterday, the index rose by 0.41%. Overall, the index remains near a 13-month low amid increased expectations of easing of the Fed's monetary policy. However, the size of the Fed's rate cut at the September meeting remains unclear, and tomorrow's publication of the core personal consumption expenditures (PCE) index - the Fed's preferred inflation measure - may clarify the situation. Consensus estimates suggest that core PCE grew by 0.2% m/m and 2.7% per annum after increasing by 0.2% m/m and 2.6% per annum in June. If the data comes in below economists' expectations, this may increase the likelihood of a softer Fed policy. According to the CME FedWatch Tool, markets see a 34.5% probability of a 0.5% rate cut in September (up from 24% the week before), and a 65.5% probability of a 0.25% rate cut (down from 76.0% the week before), with a 1% rate cut expected by the end of the year.

The New Zealand dollar rose 0.7% against the US dollar, reaching its highest level since January 2 on the back of New Zealand data. The report showed that the business confidence index rose in August to its highest level since May 2014 - to 50.6 points from 27.1 points in July. The growth was driven by the recent easing of the RBNZ monetary policy (the central bank had earlier this month delivered its first rate cut in over four years and signaled more to come).