The US dollar is set to end the week up against most other G10 currencies after a strong couple of days, driven by investors paring back their expectations for rate cuts after this week’s FOMC meeting. We think this reassessment has further to run: two 25bp cuts are still almost fully priced in for this year even though, of the 19 FOMC participants, seven anticipate no more cuts and two anticipate just one. Our sense is that it will be hard for the Fed to explain why it needs to continue cutting if, as we expect, the unemployment rate remains unusually low and GDP growth beats low expectations. We expect them to deliver just one more 25bp cut this year, helping to stabilise the dollar over the rest of 2025.
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