FX.co ★ US Dollar Depreciates Sharply

The dollar index dropped below 97.8 on Wednesday, continuing its decline from the previous day as markets speculated on several potential rate cuts by the Federal Reserve following recent economic data. The overall inflation rate remained steady at 2.7%, slightly under the anticipated 2.8%. However, the core inflation rate increased to its highest point in six months, reaching 3.1%. Traders have fully anticipated a 25 basis point rate reduction at the Fed's upcoming meeting. This expectation is gaining traction due to substantial downward adjustments in payroll figures and unfavorable outcomes from the ISM Purchasing Managers' Indexes, which have placed pressure on the dollar compared to other G10 currencies. Additionally, President Donald Trump has extended the US-China truce for an additional 90 days to allow time for further negotiations. Consequently, the dollar continued to weaken against the euro and the British pound and lost additional ground against the yen, even though officials from the Bank of Japan hinted at maintaining accommodative monetary policies.