The US dollar stabilised to a certain extent after sliding to its weakest level in multiple years, but continued to face downside risks.
The market reacted to the US President’s comments, which reflected a tolerance of a weaker currency.
Additionally, concerns are growing that Trump may favour a more dovish candidate at the helm of the Federal Reserve, potentially aligned with looser monetary policy and less institutional independence.
This backdrop adds to broader unease surrounding domestic political risks, notably the rising probability of a US government shutdown this week, weighing on the greenback.
Attention now turns to today’s Federal Reserve policy decision, which is expected to leave interest rates unchanged. With that outcome largely priced in, the market focus is firmly on forward guidance. Expectations remain centered on two 25bp cuts before year-end, and any dovish nuance in the Fed’s communication could deepen pressure on both the dollar and US Treasury yields. For now, yields are broadly stable, reflecting a market in wait-and-see mode as investors look for a clearer direction on the Fed’s 2026 policy trajectory.
