Dollar near two-and-a-half-month lows as bets on rate cut grow

Tuesday,   11-Jun-2019   02:06 PM (IST)

The dollar held above a recent two-and-a-half-month low on Tuesday as bets on an interest rate cut by the Federal Reserve increased, although investors were wary of selling aggressively before a Group of 20 summit this month. Markets are only pricing in about a 20% chance of a rate cut in June, but they are pricing in about 100% chance of a cut by July. A policy meeting is due next week. Against a basket of other currencies, the dollar was steady at 96.80, near a late March low of 96.46. It has fallen 1% so far this month. Recent dovish comments from Fed officials and weak economic data have bolstered expectations for rate cuts. But markets are also looking to a G20 meeting in Osaka, Japan, on June 28-29. U.S. President Donald Trump said on Monday he was ready to impose more tariffs if talks at the summit with China's president, Xi Jinping, make no progress. Elsewhere, the pound was lower as a leadership contest for the ruling Conservative Party got underway this week. The euro edged to a five-month high against the pound to 89.32 pence before British employment data. Recent data, particularly manufacturing figures, have been weak, fuelling expectations that the next move from the Bank of England will be a rate cut. Policymakers, however, have adopted an unexpectedly hawkish stance. The Bank of England will probably need to raise interest rates sooner than financial markets expect, policymaker Michael Saunders said on Monday.