US Dollar Index sinks below 98.00 as Fed rate cut bets pick up pace

The Greenback loses further momentum on Friday, en route to weekly losses.

Investors have practically fully priced in a Fed rate cut later in the month.

The US Nonfarm Payrolls added a meagre 22K jobs during last month.

The Greenback's decline picks up pace on Friday, sending the US Dollar Index (DXY) to the area of multi-week lows near 97.50, reversing at the same time the previous week's small advance.

Rate cut bets increase further

The US Dollar rapidly leaves behind Thursday's uptick and refocuses on the downside as investors now appear more convinced that the Federal Reserve will trim its interest rates at the September 16-17 meeting.

Indeed, traders' bets for further easing by the Fed were boosted after US Nonfarm Payrolls showed the economy added just 22K jobs last month, coming in short of forecasts (75K jobs) and lower than July's 79K jobs gain.

Additional data supporting the above scenario comes from the jobless rate, which edged higher to 4.3%, accentuating the loss of momentum in the US labour market.

In the meantime, implied rates now see 70 basis points of easing pencilled in by year-end and around 153 basis points by the end of 2026.

Technical landscape

Next on the downside for DXY emerges its weekly low of 97.10 (July 24), seconded by the 2025 bottom at 96.37 (July 1) and the February 2022 valley at 95.13 (February 2).

On the upside, the immediate hurdle comes at the August high at 100.26 prior to the weekly top at 100.54 (May 29) and the May ceiling at 101.97 (May 12).

Momentum signals remain mixed: The Relative Strength Index (RSI) has cooled to about 44, showing fading bullish energy, while the Average Directional Index (ADX) is sitting near 11, a level that signals the market lacks a strong trend.