US Dollar Falls as Markets Preview Fed and CPI Minutes

  • DXY broke a five-day winning streak and appears to take a pause below 103.00
  • Fed easing expectations tempered after last week’s jobs report
  • Fed speakers expected to reiterate gradual approach

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, had a quiet session on Monday with slight losses, holding steady despite elevated levels near last week’s highs. Amid tensions in the Middle East, market participants await key events this week, including the release of the Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) meeting minutes and Index data US Consumer Price Index (CPI).

While the US economy shows a moderate slowdown, signs of economic resilience persist. Despite this, the Fed maintains a data-driven approach, emphasizing the importance of incoming economic indicators in determining the pace of interest rate adjustments. In that sense, last week’s jobs report caused markets to rule out a 50 basis point cut in November or December.

Daily Market Summary: US Dollar Fall as Markets Await CPI Data

  • The probability of a 50 basis point cut in November or December is now zero, according to swap markets, and a 25 basis point cut next month only has a 90% probability
  • Despite strong economic data, the market still anticipates a full easing of 125 basis points over the next 12 months
  • Several Fed speakers this week are expected to emphasize data dependence
  • This week, the headline and core CPI are expected to show a slight slowdown in September, and its outcome could stop the USD bullish movement

DXY Technical Outlook: DXY momentum rests, resistance at 103.00

Indicators are resting after last week’s gains, with the index ending a five-day uptrend. The Relative Strength Index (RSI) and MACD are firmly in positive territory with room for further upside.

Supports: 102.30, 102.00, 101.80
Resistances: 103.00, 103.50, 104.00

The US Dollar FAQs


The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.


The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.


In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.


Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.

Source: Fx Street

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