USD: Softer data bolster Fed cut bets – MUFG

💡 DMK Insight

Weaker US retail sales and cooling labor demand are shifting market expectations around Fed policy, and here’s why that matters: With Fed fund futures now fully pricing in a June rate cut, traders need to adjust their strategies accordingly. This sentiment could lead to increased volatility in the forex markets, particularly for USD pairs. If the Fed does pivot towards easing, it could weaken the dollar, impacting commodities and other currencies inversely correlated to USD strength. Watch for key levels in USD/JPY and EUR/USD as traders react to these developments. But don’t overlook the flip side—if the Fed remains cautious and holds rates steady, we could see a sudden reversal in market sentiment. This uncertainty creates both risks and opportunities, especially for day traders looking to capitalize on short-term price movements. Keep an eye on upcoming economic data releases and Fed commentary for further clues on the central bank’s direction.