DXY to head below 100 – DBS

The DXY index fell 0.4% to 100.47, its weakest close of the year, notes DBS FX analyst Philip Wee.

Furthermore, the Fed is cutting to 4.5% by the end of this year

“The futures market is not yet ruling out a 50bps cut at the November FOMC meeting after the weak US Conference Board consumer report. The headline consumer confidence index fell to 98.7 in September from an upwardly revised 105.6 in August; consensus had expected a slight improvement to 104 from 103.3 previously estimated.

“Despite the headline index nearing the bottom of its two-year range, the current situation index fell to its lowest level since March 2021. Held ahead of the last FOMC meeting on September 18, consumers turned negative on current business conditions and were less satisfied with the labor market.”

“The weak consumer confidence report validates the Fed’s decision to cut the rate by 50 bps to 5% to avoid further cooling of the labor market. We maintain our view of the DXY heading below 100 based on our expectations for more Fed tapering to 4.5% by the end of this year and 3% by the end of 2025.”