Dollar slips against euro as Fed rate-cut outlook weighs
By Saqib Iqbal Ahmed
NEW YORK (Reuters) -The U.S. dollar slipped against the euro on Monday, extending last week's fall, as the U.S. currency remains under pressure from the Federal Reserve's signaling last week the possibility of interest rate cuts next year.
The dollar was higher against the yen as the Bank of Japan (BOJ) kicked off a two-day meeting that could be crucial in determining the timing of the end of the central bank’s ultra-loose stance on interest rates.
Bets that the Fed will lower its benchmark overnight interest rate at its March meeting by a quarter of a percentage point soared last week after the U.S. central bank left its policy rate unchanged in the 5.25%-5.50% range and officials forecast three-quarters of a percentage point in cuts next year.
«The Fed, having failed to push back on the aggressive dovish repricing we've seen over the last six weeks or so, has given license for financial conditions to loosen further,» said Michael Brown, market analyst at Trader X in London.
Meanwhile, European Central Bank policymakers do not expect to change their message on the need for high interest rates before their March meeting, making any rate cut before June difficult, seven people familiar with the matter told Reuters.
«Time will tell if the ECB is forced to cut interest rates sooner and more aggressively than it hopes to, but clearly markets are content betting against central banks' „higher for longer“ mantra,» Matthew Weller, global head of research at FOREX.com and City Index, said in a note.
The Federal Reserve is not pre-committing to cutting interest rates soon and swiftly, and the jump in market expectations that it will do so is at odds with how the U.S. central bank functions, Chicago Fed
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