Traders added a little more to bets that the Federal Reserve will cut interest rates by 50 basis points for a second time in November after a government report on Friday showed inflation rose modestly in August, paving the way for the central bank to focus on strengthening the labor market.
Interest rate futures reflect about a 54% chance of a half-point cut in November, compared to a still-high 46% chance of a quarter-point cut, and whatever the outcome, traders are betting that the key rate is now in the 4.75% range -5.00% will drop by 75 basis points by the end of the year.
The US Dollar Index, which measures the value of the greenback against six major currencies, eased to near 99.90 and slipped below key support at 100.20.
The Euro strengthened against the US dollar as it recovered from most of its intraday losses and returned above 1.1150. The major currency pair pared losses as the US dollar weakened again after the release of the United States (US) Personal Consumption Expenditure (PCE) Price Index data for August, which showed that inflation remained on track to return to the bank's target of 2%.
Signs of continued easing inflationary pressures will fuel market expectations for the Federal Reserve to cut interest rates further in the final quarter of the year.
