As the Federal Open Market Committee (FOMC) meeting approaches on September 18, there is anticipation among finance traders and investors regarding the potential for the United States Dollar to experience its first interest rate cut in years by the Federal Reserve.
The market speculation intensifies following the release of the Consumer Price Index (CPI) year-over-year inflation rate of 2.5%. The CME FedWatch tool currently predicts an 87% likelihood of a 25 basis points (bps) interest rate decrease.
The overall market sentiment leans towards a 100% chance of a rate cut, although a small 13% minority foresees a more significant 50 bps reduction to a 475 to 500 bps target. The distinction between a 25 bps and a 50 bps rate cut has grown over time, particularly in response to the recent CPI data.
According to a trading analyst’s viewpoint on TradingView, the U.S. Dollar index (DXY) is poised for a crash, with the analyst advocating for a short position against the currency. The analyst suggests that the DXY will perform poorly compared to the Euro (EUR) and Japanese Yen (JPY).
Continuing with insightful predictions, Meta’s advanced artificial intelligence model, Llama 3.1 Large, sees a weakened dollar in the near future. Although there might be a consolidation period leading up to the FOMC meeting, an interest rate cut of 25 or 50 bps is not perceived favorably.
The AI model projects a target range between 100 and 100.50 as the most probable outcome for the DXY. Nevertheless, the DXY could potentially decline to as low as 98 with the occurrence of a 50 bps interest rate cut.
It’s essential to note that the information provided is not intended as investment advice, as investing carries inherent risks to your capital.