Dollar Dips as Trade Optimism Fuels Federal Reserve Rate Cut Bets

The dollar experienced a decline against the yen and euro on Monday, as optimism about U.S. trade deals fueled expectations for earlier Federal Reserve interest rate cuts. The greenback remained near its four-year low against both sterling and the Swiss franc as the White House neared a deal with China.

Federal Reserve Chair Jerome Powell testified before Congress last week, leading investors to believe rate cuts might occur if inflation doesn't spike due to tariffs. This dovish outlook resulted in increased bets for a rate reduction, which reached 93.3%, up from 83% a week earlier, according to CME Group's FedWatch Tool.

Adding to the pressure on the dollar, President Trump criticized Powell and expressed a desire for significant rate cuts. Meanwhile, trade negotiations continue in Geneva, with the U.S. aiming to finalize deals by September 1. The dollar index has witnessed a significant decline, marking its biggest drop in decades.

(With inputs from agencies.)