US dollar falls even further after Fed Minutes underscore looming cuts

The dollar is one one of its worst stretches in years as steady selling sends it to the lows of the year on many fronts.

Since the FOMC Minutes, the dollar is down rough 15 pips across the board as the comments in the report suggest a strong consensus on cutting rates.

Dollar selling has turned into a real momentum trade aside from the strong blip higher after retail sales. The market is arguing that the period of US outperformance may be coming to an end. I wonder if politics isn’t a factor in light if Harris’ improved chances. Even in defeat that could be enough to win the House and lead to gridlock. Conversely, Harris could win and Republicans control the Senate (there is a very high likelihood Republicans win the Senate).

But you can argue a whole host of factors, including the market saying “this is as bad as it gets for the global economy.” Rates are coming down everywhere and while there may still be some pain in the pipeline, rate cuts further out will mitigate it. AI is disinflationary and inflation expectations are good anyway. This could be the bottom of the economic cycle, which is wild to consider given that US equities are still close to record highs.

And if it is, then money will flow out of dollars to emerging markets and beaten-down cyclical assets elsewhere. I’m not on board with that thinking but it sure sounds like that’s what the market is shouting.

This article was written by Adam Button at www.forexlive.com.