Dollar weakens against euro and sterling amid growing Fed rate cut expectations

The dollar was weak against the euro and sterling on Tuesday, hitting its lowest point since April. This happened because the U.S. economy seems to be getting weaker, which makes it more likely that the Federal Reserve will lower interest rates sooner. The chances of a rate cut in September increased to about 59.1%, up from around 55% on Friday. This change came after data showed that consumer prices were stabilizing, causing the dollar to have its first monthly loss of the year in May. The Federal Reserve's policy of keeping interest rates high is being questioned because it's putting pressure on the U.S. economy. Analysts are watching closely for signs of economic problems in the upcoming job data. The Fed is expected to raise rates by a quarter-point at their November meeting, with a total increase of 41 basis points by the end of the year. November could be a challenging time for the U.S. dollar due to an important Federal Reserve meeting and the U.S. elections. The dollar index, which measures the dollar against other major currencies, dropped to its lowest level since April. The euro and sterling gained against the dollar, while the dollar rose slightly against the yen. The European Central Bank is likely to cut rates at their meeting, but recent inflation data may affect their decision. The Bank of England and Bank of Japan also have important meetings this month. Gold prices fell slightly as investors reacted to a U.S. inflation report that was in line with expectations. However, the expectation of a rate cut by the Federal Reserve this year has kept gold on track for its fourth consecutive monthly gain. Gold futures settled lower, but were still up for the month. Despite a recent high in gold prices, some traders believe that the rally may be slowing down due to softer inflation data. Silver prices dropped, but still had their biggest monthly gain since November 2022. Platinum prices rose, while palladium prices fell. Traders are betting that the Federal Reserve will cut rates in September after recent reports showed some progress towards the Fed's inflation target. Higher interest rates can make holding gold less attractive, even though it's often seen as a hedge against inflation.