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Dollar weakens as US Election and Fed decision loom
The U.S. dollar slid amid heightened election uncertainty and a cautious Fed outlook, while oil prices gained as OPEC+ delayed a production increase.
Dollar index falls below 104 amid election uncertainty
Harris leads Trump narrowly in Iowa polls
Fed expected to cut rates by 25 basis points Thursday
OPEC+ delays 2.2 million bpd production increase
The dollar index slipped below the 104 mark on Monday as mounting uncertainty over the upcoming U.S. presidential election weighed on the greenback. The latest polls from Iowa have tightened the race, showing Harris with a narrow lead over Trump. Harris holds a 47% to 44% advantage, though this 3.4% margin of error underscores the unpredictability in a state that Trump previously carried by significant margins—over 9 points in 2016 and 8 points in 2020.
Investors are also positioning for the Federal Reserve's monetary policy announcement, set for Thursday. The central bank is widely expected to implement a cautious 25 basis point rate cut, which would bring the federal funds rate to a target range of 4.50%-4.75%. This marks a deviation from the Fed’s usual Wednesday schedule, with markets anticipating another similar reduction in December. However, the Fed’s policy outlook for 2025 remains uncertain, and Chair Jerome Powell is expected to emphasize a cautious approach, noting that further easing will remain highly dependent on economic data.
The Fed’s decision on Thursday, along with fresh economic projections, is anticipated to offer more guidance on the policy path into next year. However, the pace and direction of U.S. monetary policy will likely remain contingent on incoming data, leaving market participants to await further clarity in the coming months.
Oil prices lift as OPEC+ delays output increase
Oil prices edged higher in Asian trading after OPEC+ confirmed on Sunday a one-month delay in its planned production increase of 2.2 million barrels per day (bpd). The coalition also underscored its “collective commitment to achieve full conformity” with its existing output targets.
This adjustment aligns with OPEC+’s ongoing strategy to restore production in gradual increments following extensive cuts implemented over the past two years. Initially, the alliance had intended to begin the phased reduction of the 2.2 million bpd cut in December 2024, with further increases expected in early 2025.
