US Dollar remains under pressure in a post-Fed rate cut world

The Greenback remains off-kilter following the Fed’s recent pivot into a rate-cutting cycle. Last week, the US central bank delivered a jumbo 50 bps rate cut. The US Dollar remains under pressure, but markets have quickly pivoted to more impatient waiting for the next rate call.

Here is what you need to know on Tuesday, September 24:

The US Dollar Index remains pinned on the low end following the Federal Reserve’s (Fed) 50 bps rate slash last week. The DXY continues to clatter along the floor, grinding sideways just above the 100.50 level. US economic data is strictly mid-tier on Tuesday, but investors will keep an eye out for Fed Governor Michelle Bowman. Chicago Fed President Neel Kashkari warned on Monday that the future pace of Fed rate cuts may be slower than many expect over the next year, signalling that the Fed may be poised to clamp down on outsized rate cuts moving forward.

EUR/USD is struggling to hold onto high territory to kick off the new trading week. Despite an overall softening in Greenback positioning, the Euro took a hit after pan-EU Purchasing Managers Index (PMI) figures for September broadly missed the mark on Monday.

GBP/USD was able to eke out further gains on Monday, climbing to a fresh 30-month high near 1.3360. Despite UK PMI figures printing broadly below expectations to start the week, the Pound Sterling’s recent bull run continues to chew through chart paper. However, political threats loom just over the horizon with UK Prime Minister Keir Starmer warning that the UK’s domestic economy could be on a collision course with “painful” economic reforms that are needed, especially with UK inflation figures proving to be far stickier than in other countries.

USD/JPY continues to grapple with the 144.00 handle, and the pair is struggling to develop meaningfully-bullish legs as the Yen continues to grind into fresh highs against the US Dollar. JPY traders will be keeping an eye out for Bank of Japan (BoJ) Governor Kazuo Ueda on Tuesday, with Japanese Tokyo Consumer Price Index (CPI) inflation figures due later in the week.

AUD/USD found a new nine-month high on Monday, testing north of 0.6850 for the first time since last December. Aussie traders are jostling for position ahead of the Reserve Bank of Australia’s (RBA) rate call, due early Tuesday. Despite recent signs of a potential economic slowdown in Australia, the Australian labor market remains tight overall, and the RBA is widely expected to remain on hold on rates for the time being.

West Texas Intermediate (WTI) US Crude Oil prices have recovered over 10.5% bottom-to-top since September 10’s bottom bids of $64.75, the key commodity’s lowest prices since May of 2022. Crude Oil prices are catching a bid heading into Tuesday after it was announced that the US is deploying additional military personnel to the Middle East as Israel continues to expand its military campaign against Palestinian Hamas, which crossed within the borders of Lebanon over the weekend. A fresh rocket barrage from Israel against Hamas targets within Lebanon claimed the lives of nearly 300 people and wounded over a thousand. Israel has stated the fresh round of explosive attacks are a retaliation against a recent Hamas rocket salvo that killed three people in Israel.

Gold continues to benefit healthily from the latest Fed rate cut, with XAU/USD climbing to a new record high just below $2,640. XAU/USD has closed flat or higher for all but one of the last 11 consecutive trading months, climbing over 45% in value from last October’s lows near $1,800.