The US dollar rose slightly on Tuesday ahead of a scheduled speech by Federal Reserve Chair Jerome Powell later in the session, following the central bank’s recent decision to cut interest rates.

At 03:00 AM ET (08:00 GMT), the dollar index, which measures the greenback against a basket of six other currencies, edged up 0.1% to 97.012, rebounding modestly after a decline in the previous session.

Focus on Powell’s Speech

The dollar has been trading in a narrow range this week after sharp swings last week, as attention turns to Powell’s remarks later today.

Powell’s speech comes after the Fed cut rates by 25 basis points at its latest meeting last week. However, the central bank’s guidance on the future path of borrowing costs left room for debate over the possibility of further cuts before the end of 2025, putting more focus on any signals Powell may provide regarding monetary policy direction.

New Fed governor Steven Miran on Monday called for a sharp rate cut, but several of his colleagues struck a more cautious tone, stressing that the priority should remain ensuring inflation returns to the Fed’s 2% target.

Analysts at ING noted: “Both Alberto Musalem, Raphael Bostic, and Beth Hammack are on the hawkish side of the spectrum, which is not particularly surprising, but their remarks suggest the hawkish front remains relatively firm despite mounting pressure for easing.”

According to CME’s FedWatch tool, markets currently assign about a 90% chance of the Fed lowering its target rate by 25 basis points from the current range of 4%–4.25% at its October meeting. Markets also see around a 75% probability of another 25 basis point cut at the subsequent December meeting.

Euro Slips Despite Strong PMI Data

In Europe, the EUR/USD pair fell 0.1% to 1.1789, with the euro paring gains after its best daily performance in a week during Monday’s session.

Data released earlier Tuesday showed that economic activity in Germany—the eurozone’s largest economy—accelerated in September, recording its fastest pace in 16 months thanks to a rebound in the services sector.

Germany’s flash composite PMI, compiled by S&P Global, rose to 52.4 in September from 50.5 in August, beating expectations of 50.6.

September marked the fourth straight month the index, which tracks services and manufacturing and accounts for more than two-thirds of the eurozone economy, came in above the 50 threshold that signals growth.

ING commented: “This may not be grounds for major excitement about the euro, but it is probably enough to keep the single currency well-positioned to benefit from further shifts away from the dollar.”

The bank added: “We expect EUR/USD to hover around the 1.1800 level today, with the potential for more moderate gains later this week.”

Gold prices rose in the European market on Tuesday, extending gains for the second day in a row and continuing to set fresh record highs, on track to surpass the $3,800 per ounce barrier for the first time in history, supported by the ongoing decline in US dollar levels against a basket of global currencies.

This comes amid growing expectations of a more accommodative path for interest rate cuts in the United States, especially after the recent signals from the Federal Reserve.

To reaffirm these expectations, global financial markets are awaiting later today an important speech by Federal Reserve Chair Jerome Powell, which is expected to provide strong evidence regarding the course of US monetary policy easing.

Price Overview

• Gold prices today: Gold rose by more than 1.0% to $3,785.24 an ounce, the highest level ever, from the opening level of $3,746.28, with a low recorded at $3,736.79.

• At Monday’s settlement, gold prices rose by 1.65%, marking a second consecutive daily gain and setting a new record high, supported by the decline in the US dollar and yields.

US Dollar

The dollar index fell on Tuesday by 0.1%, extending its losses for the second straight session, moving away from a two-week high at 97.82 points, reflecting the continued retreat in US dollar levels against a basket of global currencies.

Beyond technical corrections and profit-taking, the dollar remains under pressure from rising expectations of further Federal Reserve rate cuts in the coming period.

US Interest Rates

• The Federal Reserve carried out its first interest rate cut since December, lowering rates by 25 basis points last week, while signaling openness to further monetary easing.

• The Fed’s median projections point to an additional 50 basis points of rate cuts in 2025.

• The median forecast of Fed members shows one 25 basis point cut in 2026, with a similar reduction expected in 2027.

• New Fed governor Steven Miran said on Monday that the central bank is underestimating the degree of its monetary tightening and risks the labor market if it fails to implement significant cuts.

• According to CME’s FedWatch Tool, market pricing currently shows a 90% probability of a 25 basis point cut in October, versus a 10% chance of leaving rates unchanged.

Jerome Powell

To reprice the above contracts, markets later today await remarks by Fed Chair Jerome Powell on the US economic outlook at the Greater Providence Chamber of Commerce’s Economic Outlook Luncheon in Rhode Island, where he is also expected to take questions from the audience.

Gold Outlook

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “The short-term trend remains bullish, but on a daily basis, we expect a short-term pullback due to technical factors.” He added that weakness in the dollar is currently supporting gold.

SPDR Fund

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 6.01 metric tons on Monday, marking a second consecutive daily increase, bringing the total to 1,000.57 metric tons, the highest level since August 3, 2022.

The euro rose in the European market on Tuesday against a basket of global currencies, continuing to move in the positive territory for the second day in a row against the US dollar, as the recovery from a two-week low extends, benefiting from the decline in US currency levels ahead of Federal Reserve Chair Jerome Powell’s speech.

Following the latest hawkish meeting of the European Central Bank, the odds of European interest rate cuts until the end of this year have declined, and in order to confirm those odds, investors are awaiting at successive times today the release of data on the main sectors composing the European economy during September.

Price Overview

• Euro exchange rate today: The euro rose against the dollar by 0.15% to ($1.1820), from the opening price today at ($1.1803), and recorded the lowest level at ($1.1795).

• The euro ended Monday’s trading up by 0.5% against the dollar, in its first gain in the last four days, after earlier touching a two-week low at $1.1726.

US Dollar

The US dollar index fell on Tuesday by 0.1%, extending its losses for a second straight session, moving away from a two-week high at 97.82 points, reflecting the continued decline in US currency levels against a basket of global currencies.

Aside from correction and profit-taking, US dollar levels are weakening ahead of Federal Reserve Chair Jerome Powell’s speech later today, which is expected to include new evidence on the likelihood of additional US interest rate cuts during the remainder of this year.

European Interest Rates

• Sources: Policymakers at the European Central Bank believe there is no need for further interest rate cuts to achieve a 2% inflation rate, despite new economic forecasts pointing to lower interest rates over the next two years.

• Sources: Unless the eurozone is hit by another major economic shock, borrowing costs are expected to remain at current levels for some time.

• Money market pricing of the odds of the European Central Bank cutting interest rates by 25 basis points in October is currently stable around 10%.

• Traders have reduced their bets on ECB monetary easing, pointing to the end of this year’s rate-cutting cycle.

• In order to reprice those odds, investors are awaiting at successive times today the release of data on the main sectors composing the European economy during September.

Expectations for the Euro’s Performance

We at Economies.com expect: if the main sector data comes in more positive than currently expected in the markets, the odds of keeping European interest rates steady until the end of this year will be confirmed, which will support the euro’s rise in the foreign exchange market.

The Japanese yen rose in the Asian market on Tuesday against a basket of major and minor currencies, continuing its recovery for the third consecutive day from a two-week low against the US dollar, benefiting from the decline in the US currency ahead of Federal Reserve Chair Jerome Powell’s speech.

The odds of a Japanese interest rate hike in October retreated, following less aggressive comments from Bank of Japan Governor Kazuo Ueda, while awaiting more evidence on the path of monetary policy normalization in the world’s fourth-largest economy.

Price Overview

• Yen exchange rate today: The dollar fell against the yen by 0.1% to (¥147.60), from the opening price today at (¥147.71), and recorded the highest level at (¥147.77).

• The yen ended Monday’s trading up by about 0.2% against the dollar, in a second daily gain in a row, after earlier touching a two-week low at ¥148.38.

US Dollar

The US dollar index fell on Tuesday by 0.1%, extending its losses for a second straight session, moving away from a two-week high at 97.82 points, reflecting the continued decline of the US currency against a basket of global currencies.

Aside from correction and profit-taking, the US dollar is weakening ahead of Federal Reserve Chair Jerome Powell’s speech later today, which is expected to provide new evidence on the likelihood of further US interest rate cuts during the remainder of this year.

Japanese Interest Rates

• Bank of Japan Governor Kazuo Ueda said on Friday: attention must be paid to the impact of trade policies on financial markets, foreign exchange markets, as well as on Japan’s economy and prices.

• Ueda added: the Bank of Japan will continue to raise interest rates if the economy and prices move in line with expectations, in accordance with improvements in economic and price conditions.

• Following Ueda’s comments, pricing of the odds of the Bank of Japan raising interest rates by a quarter point in the October meeting declined from 75% to below 50%.

• To reprice those odds, investors await further data on inflation, unemployment, and wages in Japan.