The US dollar recorded its biggest drop since August, a day before the crucial FOMC meeting, according to UBS analysis. The US dollar index, which had been stable for three months, finally declined sharply, reflecting continued pressure on the US currency.
UBS expects the US dollar's weakness to continue until the end of 2025. EUR/USD, meanwhile, surged past its July high, with a short-term target of 1.2000 and a year-end target of 1.2300, signaling momentum for the euro to strengthen against the US dollar.
The FOMC meeting early Thursday morning Malaysia time is seen as a key turning point, with the broad market expecting the first interest rate cut of the year. Pressure comes from calls for more aggressive monetary policy easing to support the economy.
Support for rate cut expectations was also bolstered by weak labor market data. Strong moves in the bond market, involving both short- and long-term yields, signal confidence that the Federal Reserve needs to act more quickly.
