The US dollar could continue to face pressure as worries about the US economy’s growth outlook intensified, raising expectations of a significant rate cut by the Federal Reserve.
Weak US economic data, such as the drop in job openings to a 3-year low and disappointing manufacturing figures, strengthened expectations of a more dovish Fed.
Traders are now equally pricing in a 25- and a 50-basis-point rate cut this month, weighing on the dollar due to concerns about the U.S. economy’s future.
Meanwhile, US Treasury yields could continue to fall as expectations for rate cuts increase, reflecting a shift to safer assets amid concerns about slowing growth. Lower yields could contribute to the dollar’s weakness, as the narrowing yield gap between the US and other countries reduces the dollar’s attractiveness.
The market’s attention is now on the upcoming Non-Farm Payrolls (NFP) report. The NFP figures are expected to inch slightly up. However, weaker-than-expected figures could strengthen expectations for deeper rate cuts going forward, further pushing US yields and the dollar down.
