US Dollar Index rises to near 101.00 following Fed Powell remarks to lower rates gradually – FXStreet

• The dollar index rose after Fed Chairman Jerome Powell said the central bank would lower interest rates “over time.”
• The CME FedWatch tool suggests a 61.8% chance that the Fed will cut rates by 25 basis points (bp) in November.
• The US ISM manufacturing PMI for September is expected to be 47.5, an improvement from the previous reading of 47.2.

The US dollar index (DXY), which measures the value of the US dollar (USD) against six other major currencies, extended its gains for the second day in a row. DXY is trading around 100.80 in Asian time on Tuesday. The US dollar (USD) strengthens following Federal Reserve Chairman Jerome Powell's latest speech.

Fed Chairman Jerome Powell said the central bank is in no hurry and will lower benchmark interest rates “over time.” Powell added that the recent 50 basis point rate cut should not be seen as an indication of similarly aggressive future action, noting that future rate changes are likely to be more modest. .

According to the CME FedWatch tool, the market puts a 61.8% chance that the Federal Reserve will cut rates by 25 basis points in November, but the probability of a 50 basis point cut is 38.2%, down from 53.3% a day earlier.

However, the U.S. core personal consumption expenditure (PCE) price index for August announced last week rose 0.1% from the previous month, falling short of the expected 0.2% increase, and the Fed said that inflation in the U.S. economy is easing. It matched the outlook. This raises the possibility that the Fed will embark on an aggressive rate-cutting cycle.

Traders are likely to watch US manufacturing data later in the North American session, including the ISM Manufacturing PMI, which is expected to improve to 47.5 in September from 47.2 previously. This report may provide a reliable outlook on the current state of the U.S. manufacturing industry.