More Problems for Dollar in Forex Markets as Rate Cut Priced In

Camila Martinez
US currency and graph underneath

Markets appeared to generally accept that interest rate cuts in the US were a likely possibility at some stage in 2019 on Wednesday – and punished the dollar as a result.

The dollar index, a tool used to see how the currency is doing in relation to a basket of others, was stuck in a flat position at 96.707, meaning that it was still close to the low point of 96.459 which it saw earlier in the week.

Speculation that the US central bank, the Federal Reserve, will cut interest rates reached fever pitch after it was revealed last week that the US jobs market was not performing as well as had been hoped.

The Fed will meet next week, on June 18th and 19th, although it may not make its move until a future meeting.

Elsewhere, the USD/JPY pair did not move much, although the Chinese offshore yuan began to see some positive changes. It rose from its low point in recent days to 6.9250 against the US dollar.

With the middle point of the foreign exchange trading week now here, it’s time to look at what the last few days of the week will hold for traders.

Today’s main event will be the release of the US consumer price index (excluding food and energy) covering the month of May. This development is likely to be closely monitored by dollar traders who are concerned about the low performance of the currency in recent weeks.

It is expected that this will show a month on month change from 0.1% to 0.2%, and no year on year change from its current position of 2.1%, when it is released at 12.30pm GMT.

Also up today are two speeches from the European Central Bank’s Benoît Cœuré, who sits on the bank’s Executive Board. He will first speak at 2.15pm GMT, and he will be up again shortly afterwards at 3pm GMT.

Looking ahead to tomorrow (Thursday), there will be a number of jobs releases from Australia overnight.

The overall unemployment rate for the month of May will be out at 1.30am GMT and is expected to show a change from 5.2% to 5.1%.

Full-time employment, a measure which was last recorded at -6,300, will also be out then.

The German harmonised index of consumer prices for the month of May are expected at 6am GMT and are predicted to hold steady year on year at 1.3%.

Markets are still predicting that the Swiss National Bank will hold its interest rates at -0.75% when it announces its decision at 7.30am GMT.

European industrial production figures for April are due out at 9am GMT. Month on month, this is due to show a change from -0.3% to -0.5% – a worrying development for those concerned about the performance of the Eurozone’s economy.

This week’s jobless data will be out of the US at 12.30pm GMT. Initial jobless claims are predicted by analysts to remain almost the same, although a slight drop from 218,000 to 217,000 may occur. Continuing claims, meanwhile, are now expected to drop from 1,682,000 to 1,680,000.

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