Dollar on the Edge: Market Optimism Fuels Rate Cut Bets

On Monday, the dollar lingered near its lowest point in four years against the euro as optimism surrounding U.S. trade deals fueled anticipation for earlier Federal Reserve interest rate cuts. The currency also neared similar lows against sterling and registered a decade low against the Swiss franc as tariffs eased between Washington and China.

Investors interpret Fed Chair Jerome Powell's testimony to Congress as suggestive of potential rate decreases, provided that inflation remains stable amidst ongoing tariffs. The likelihood of a rate cut by September is growing, as reflected in market projections. Meanwhile, market analysts highlight the Friday payroll report as a critical indicator for the dollar's direction.

President Trump's calls for a significant benchmark rate reduction and potential repositioning at the Federal Reserve add further pressure on the greenback. As negotiations roll on, U.S. trade dynamics remain pivotal in determining the dollar's path, with numerous deals poised for completion before Labor Day.

(With inputs from agencies.)