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The slightest hint of a possible interest rate cut by the Fed was enough for the greenback to go down.
Judging by the rate of decline in the yield of dollar-denominated assets in the past few days, forex, probably following the derivatives market, began to lay in the Fed's dovish quotes.
It is assumed that the narrowing of the differential in interest rates will undermine the position of the US currency.
In such conditions, it's time to think about changing the upward trend in the USD to a downward one.
At least the options market signals that investors have now formed the strongest bearish sentiment for the dollar since January last year.
"We do not know when problems related to trade and other issues will be resolved. However, we are closely following the consequences of these events for the US economy and are ready to take appropriate measures to support economic growth, the labor market and inflation in the country," said Fed Head Jerome Powell last Tuesday.
He also noted that the reduction in interest rates to almost zero, which the Fed, the ECB and other central banks issuing reserve currencies "treated" the crisis of 2008, will definitely be required in one form or another in the future.
"The Fed may have slightly opened the door for a potential interest rate reduction (once or twice), which the market has already considered this year," believes Chris Rapci from MUFG Union Bank.
"Investors are increasingly convinced that the US central bank will lower the rate, the only question is when and how much," said Mark Cabana, a strategist at Bank of America.
The market for futures on the Fed rate is already laying in quotes for three declines - in September, December 2019 and March next year.
Meanwhile, some experts believe investors' expectations regarding the rate cut are excessively too much.
"I think that the market overestimated the scale of interest rate cuts," said Axel Weber, chairman of the board of directors of the Swiss bank UBS.
"There are no clear indications of an immediate rate cut in the recent statements by the Fed. There is only a possibility that in case of further deterioration of data in the second half of the year, the central bank may consider the possibility of taking corrective actions, "he added.
John Waldron, president and chief operating officer of Goldman Sachs, takes a similar view.
"The market lays a fairly significant set of steps on the part of the Fed in the price. I believe that the market is too optimistic about how much and how soon the regulator will change the rate, "he said.
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