FX.co ★ Dollar Firms Up on Fed Caution

The dollar index advanced towards the 100 mark on Tuesday, reaching its highest level in three months. This movement came as officials from the Federal Reserve expressed caution regarding further interest rate reductions, leading traders to lower their expectations for more monetary easing. Fed Governor Lisa Cook recognized the rising risks in the labor market but did not endorse a rate cut for December. Similarly, Chicago Fed President Austan Goolsbee emphasized that inflation remains his main concern. Their comments followed last week's rate reduction, after which Fed Chair Jerome Powell indicated that a December rate cut is not guaranteed. Currently, the probability of an additional rate cut next month is estimated at approximately 65%, a decline from 94% the previous week. In other developments, the latest ISM Manufacturing PMI revealed a more significant contraction than anticipated, along with weaker price pressures. Investors are now focusing on the upcoming ADP employment and Challenger job cuts reports for updated information regarding labor market conditions.