U.S. Dollar Slips Post-Fed Rate Cut Amid Global Market Moves

The U.S. dollar declined after a significant interest rate cut by the Federal Reserve that was widely expected by markets. The Fed's move, aimed at maintaining low unemployment as inflation eases, has influenced various global currencies. Insights from analysts explain the future outlook and reactions from other markets.

The U.S. dollar dipped on Thursday following a larger-than-expected interest rate cut by the Federal Reserve, which had been anticipated by the markets. The Fed initiated its monetary easing cycle with a half-percentage-point cut, emphasized by Chair Jerome Powell's remarks on ensuring continued low unemployment as inflation softens.

Market expectations had veered towards a dovish outcome before the decision, with a 65% probability of a 50 basis point cut. Experts like Salman Ahmed from Fidelity International noted the preemptive nature of the cut and the cautious stance on future policy easing. The dollar index saw a slight drop, maintaining stability close to pre-decision levels.

Global market reactions included a rise in the Australian and New Zealand dollars, bolstered by favorable domestic data. In contrast, the yen experienced a sharp squeeze in short positions against the dollar, while currencies like the euro and sterling saw moderate gains. Britain's steady inflation data swayed central bank rate expectations, reinforcing a likely hold on interest rates.

(With inputs from agencies.)