US dollar extends losses to two-week trough on financial stability concerns
The US dollar fell in European trade on Tuesday against a basket of major rivals, extending losses for the second straight session and plumbing a two-week trough on concerns about the US financial stability following the credit rating cut.
US President Donald Trump once again called on the Federal Reserve to cut rates soon as a necessary measure to support the US economy against increasing global challenges.
The Index
The dollar index fell 0.4% today to 100.05, the lowest since May 9, with a session-high at 100.58.
On Monday, the index gave up 0.6%, the second loss in three days against a basket of major rivals.
Moody’s finally joined Standard & Poor and Fitch and downgraded the pristine US credit rating by one notch, pointing to the persistent US budget deficit and higher borrowing costs as reasons for concern.
US President Donald Trump once again called on the Federal Reserve to cut interest rates in posts on his social media accounts.
Atlanta Fed President Raphael Bostic said earlier this week that he’s leaning towards a single interest rate cut this year.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in June stood at just 8%.
The odds of a 0.25%% Fed rate cut in July stood at 37%.
Traders now expect 50 basis points overall of Fed rate cuts this year, likely starting in October.
New York Fed President John Williams said he hasn’t noticed a sharp decline in US assets, noting the US dollar remains the world’s reserve currency.
Gold moves in a positive zone as dollar weakens
Gold prices rose in European trade on Tuesday on track for the second straight daily profit as the dollar weakened against major rivals.
It comes amid concerns about the US financial stability after the US credit rating cut, which increased the challenges facing US policymakers.
The Price
Gold prices rose 0.25% today to $3237 an ounce, with a session-low at $3204.
On Monday, gold rose 0.85%, the second profit in three days away from a five-week trough at $3120.
US Dollar
The dollar index fell 0.4% on Tuesday, plumbing a two-week trough at 100.05 against a basket of major rivals.
Moody’s finally joined Standard & Poor and Fitch and downgraded the pristine US credit rating by one notch, pointing to the persistent US budget deficit and higher borrowing costs as reasons for concern.
US President Donald Trump once again called on the Federal Reserve to cut interest rates in posts on his social media accounts.
Atlanta Fed President Raphael Bostic said earlier this week that he’s leaning towards a single interest rate cut this year.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in June stood at just 8%.
The odds of a 0.25%% Fed rate cut in July stood at 37%.
Traders now expect 50 basis points overall of Fed rate cuts this year, likely starting in October.
SPDR
Gold holdings at the SPDR Gold Trust rose 2.3 tons on Monday to a total of 921.03 tons away from March 20 lows at 918.73 tons.
Aussie is worst performing currency after RBA rate cut
The Australian dollar tumbled on Tuesday against a basket of major rivals, resuming losses against the US counterpart after a short hiatus and becoming the worst performing G8 currency after the RBA’s rate cut.
The Reserve Bank of Australia voted to cut interest rates by 25 basis points to 3.85%, the lowest since May 2023, as inflation cooled.
The Price
The AUD/USD price fell 0.5% today to $0.6424, with a session-high at $0.6459.
The Aussie rose 0.85% on Monday against the dollar, the first profit in four days after the US credit rating cut.
Losing Currencies
The Aussie is leading the losing currencies today, with a 0.5% drop on the greenback, and a 0.6% dip against both the pound and the euro. It fell 0.55% against the Swiss franc, and 0.4% against the Canadian dollar.
RBA
The Reserve Bank of Australia voted to cut interest rates by 25 basis points to 3.85%, the lowest since May 2023, and the second such cut since the start of the policy easing cycle in February.
The decision was in line with expectations and aims at boosting the economy through policy easing as inflationary pressures receded.
The bank noted that any additional rate cuts this year will heavily depend on data and economic developments.
The bank expects inflation to drop and unemployment to tick higher to the pressures on the global trade tension.
Currently, the market is estimating 57 basis points of total rate cuts by the RBA this year.
RBA cuts interest rates to two-year low
The Reserve Bank of Australia voted to cut interest rates by 25 basis points to 3.85%, the lowest since May 2023, and the second such cut since the start of the policy easing cycle in February.
The decision was in line with expectations and aims at boosting the economy through policy easing as inflationary pressures receded.
The bank noted that any additional rate cuts this year will heavily depend on data and economic developments.