Downside trajectory for US$ on weak data, likely rate cut

SINCE the start of October, worries about a slowing US economy heightened after a series of lacklustre data emerged in key areas such as manufacturing growth, labour and inflation. These downbeat data releases caused the USD to reverse previous gains, as market expectations of another rate cut by the US Federal Reserve (Fed) increased.

Currently, the CME Fedwatch has indicated that it was almost certain of a 25-basis point (bps) reduction during the Federal Open Market Committee (FOMC) meeting later this week.

The Fed has also expressed that key uncertainties, such as the Sino-US trade war, were unlikely to be resolved anytime soon. In their opinion, slowing global growth has begun to negatively impact the broader US economy. Therefore, it has resulted in a bleaker outlook for the USD.