US Dollar Forecast: DXY Eyes 103.766 Resistance While Gold Surges on Falling Yields

October 16, 2024

1 minute read

Pound Drops on Soft Inflation Data

The British pound briefly fell below $1.30 after weaker-than-expected inflation data from the U.K. raised expectations of aggressive rate cuts by the Bank of England (BoE). Inflation dropped to 1.7% in September, its lowest since April 2021, missing the 1.9% forecast. This fueled bets for a BoE rate cut in November and a potential second cut in December.

Sterling later recovered to $1.3018 but remains vulnerable, with ING’s FX strategist Francesco Pesole suggesting further downside for the pound below $1.30. The euro lost ground, while traders await Thursday’s European Central Bank (ECB) meeting, where a 25-basis-point rate cut is widely expected.

Dollar Firms Ahead of Fed Decision, Election Risks

The dollar remains firm, supported by expectations that the Federal Reserve will continue cutting rates. Traders have priced in a 92% chance of a 25-basis-point rate cut in November. Former President Donald Trump’s potential re-election is also seen as dollar-positive, adding another layer of support for the greenback. The euro remains near a 10-week low, trading at $1.0891, and the dollar rose to 149.37 yen.

Fed officials remain cautious about future rate cuts, with the Atlanta Fed’s Raphael Bostic hinting at only one rate cut for 2023, while San Francisco Fed’s Mary Daly forecast one or two cuts by 2024.