Dollar declines amid increased rate cut expectations

The dollar declined after GDP data showed a downward revision, leading to increased expectations for a rate cut next March.

Today’s PCE data could stir market movements in case of a surprise and could fuel more downward pressures on the dollar if inflation falls faster than expected.

The Euro rose slightly against the dollar with the ECB and its members maintaining their hawkish outlook, despite the difficult economic conditions in the euro area.

However, traders expect the ECB to move toward interest rate cuts next year.

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The pound saw some volatility but stabilised to a certain extent against the dollar. Wednesday’s surprising fall in inflation led to speculation of an earlier BOE rate cut. However, BoE policymakers might maintain a restrictive policy until price stability is achieved.

Tomorrow’s GDP and retail sales data could strongly affect the currency’s trajectory.

The yen could continue to benefit from the dollar’s weakness, although the BOJ’s delayed policy shift could prevent stronger gains for the Japanese currency. Any hints from the Japanese central bank of a move toward a tightening cycle could strengthen the yen’s position.