What’s the market sensing? A 50 basis-point cut? Speculators are rapidly positioning themselves for a sizeable Federal Reserve rate cut next week. As a result, the dollar is under heavy pressure, hitting its lowest level of the year against the yen, while gold soared to a fresh record high in the aftermath of an overnight shift in investor expectations.
Traders have suddenly raised the odds of a half-point Fed rate cut to 41%, up from just 14% the day before. Stocks, Treasury prices, and commodities are all rallying in response to this sudden surge in market sentiment.
The dollar slid to 140.41 yen (USD/JPY), marking its weakest point since December 28, and was last seen trading at 140.56 by 10:30 GMT. Hawkish remarks from Bank of Japan policymakers have only strengthened the yen’s hand, with policy board member Naoki Tamura voicing concerns that inflation risks are rising.
The dollar index (DXY) fell to a one-week low of 101.00, weighed down by these developments.
Treasuries also joined the rally, with yields on 10-year notes falling 4.2 basis points to 3.638%. Meanwhile, the euro (EUR/USD) climbed 0.18% to $1.1094, further buoyed by European Central Bank President Christine Lagarde’s comments dismissing the prospect of an October rate cut.
Gold, often a haven in such times, is set for its strongest weekly gain since mid-August, up 2.8%, and hitting an all-time high of $2,570 an ounce. Dollar weakness is giving the yellow metal a serious lift. At last glance, gold was trading up 0.5%, sitting at $2,572 an ounce.
Subscribe to Investomania for more Forex news and updates.
