US Dollar remains weak as market awaits Thursday's inflation data

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The US Dollar continues to struggle amid signs of disinflation in the US economy, fostering confidence in a potential September rate cut from the Federal Reserve (Fed) among market participants.

US Dollar, down 0.80% last week, now at lowest level since mid-June. Anticipation builds with the upcoming release of the June inflation figures and Fed talks. Market is pricing in less than 10% odds of a cut in July and around 80% in September. The US Dollar continues to struggle amid signs of disinflation in the US economy, fostering confidence in a potential September rate cut from the Federal Reserve among market participants.

The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

 

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