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The US dollar remained under pressure following last week’s Federal Reserve rate cut.
Comments from the Federal Reserve’s members could also weighed on the currency. Markets continue to expect several interest rate cuts over the next few months as the Federal Reserve could move to support the US economy if inflation continues to decline.
While treasury yields have been rebounding to a certain extent during the last few days, helping stabilize the US dollar temporarily, both could remain under pressure due to the direction of the US monetary policy.
Looking ahead to Friday, market attention is focused on the core Personal Consumption Expenditures (PCE) report, the Fed’s preferred inflation gauge. Any surprises in the PCE data could influence U.S. bond yields and drive the dollar’s direction.
If inflation comes in lower than anticipated, bond yields may decline, placing further pressure on the greenback. Whilst traders anticipate significant rate cuts by 2025, bond markets remain sensitive to shifts in inflation and signals from the Fed, which will likely shape both bond and dollar performance going into next week.
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