Fed Signals Fuel Cut Expectations
The primary drag on the greenback came from Federal Reserve Chair Jerome Powell, who reaffirmed a dovish stance during a Tuesday speech, citing persistent labor market stagnation and a lack of hiring momentum.
With official data unavailable due to a prolonged U.S. government shutdown, Powell’s comments left markets confident the Fed can proceed with easing.
Fed funds futures now fully price a quarter-point cut at both the October 28–29 and December meetings, with further easing expected in 2026, according to LSEG data.
Risk Rally Erodes Dollar Safe-Haven Appeal
Stronger equity sentiment in both Europe and the U.S. also pulled capital away from the dollar. A rebound in S&P 500 performance and solid corporate earnings reports improved investor appetite for equities.
ING’s Francesco Pesole noted that as risk assets recovered from recent pressure, capital rotated out of the dollar. Meanwhile, the STOXX 600 gained 0.8% on earnings optimism and political stabilization in France, which helped the euro rise for a second consecutive session, reaching $1.1635.
Crosses Strengthen Against Greenback
The yen and Australian dollar also posted gains, recovering from last week’s sharp selloffs. The yen strengthened despite political uncertainty in Japan, while the Australian dollar benefitted from stronger regional equities.
