Asian session review: the US dollar has stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, remaining near the highest level since August 8, reached yesterday amid expectations of a moderate easing of the Fed's monetary policy.

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 0.03% to 103.26. Recent US data showed that the economy is slowing only slightly, while inflation in September rose slightly more than expected, which weakened the likelihood of another aggressive Fed rate cut. In addition, yesterday Fed Governor Christopher Waller called for "more caution" on interest rate cuts ahead, citing recent economic data. According to the CME FedWatch Tool, markets see a 88.2% probability of a 0.25% rate cut at the November meeting (compared to 85.2% a week earlier) and a 80.6% probability of a 0.25% rate cut in December (compared to 77.1% a week earlier), with a 0.45% rate cut expected by the end of the year.

The euro fell by 0.2% against the US dollar amid a correction of investors' positions ahead of the ECB meeting, the results of which will be announced tomorrow. Although the ECB began its monetary easing cycle this summer with a more cautious approach, experts believe that the latest economic data from the eurozone is more in line with the more sustained pace of rate cuts by the central bank. Inflation continues to slow down, and September data showed that the consumer price index fell below the central bank's 2% target for the first time since 2021, and core inflation is also showing moderate downward progress. Notably, the latest sentiment data has been somewhat discouraging. The September manufacturing PMI fell to 45.0, while the index of business activity in the service sector also declined in recent months. These data have raised concerns among market participants that the eurozone economy may be vulnerable to a slowdown in GDP growth. In addition to the 25 basis point rate cut expected this week, experts believe that more significant progress in the fight against inflation, combined with concerns about economic growth, will force the ECB to adhere to a more consistent pace of rate cuts in the future. Most likely, the central bank will cut the interest rate by 25 basis points at each of its meetings until the end of the first quarter of 2025, and then move to cut rates quarterly, bringing the deposit rate to 2.00% by the end of 2025.