By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
The US dollar slipped to multi-week lows on Tuesday, extending recent weakness as investors positioned for more monetary easing by the Federal Reserve. Rapidly softening labour market data has fueled bets that the Fed will need to accelerate the pace of its rate cuts, with markets increasingly pricing reductions not only in September but also in October and December.
Political pressure added to the dovish tone. In a social media post on Monday, President Trump urged Fed Chair Jerome Powell to deliver a “bigger” cut, citing strains in the housing market. The intervention reinforced concerns over the central bank’s independence in the aftermath of the legal dispute with Fed Governor Lisa Cook.
In the meantime, Treasury yields remained broadly stable, with the 10-year yield holding above 4.0%, but could still come under pressure. Still, bonds could react to today’s retail sales data, which is expected to show a 0.3% monthly gain. A softer print would strengthen the case for further easing, likely weighing on both yields and the dollar, while an upside surprise could provide temporary relief.