U.S. Dollar Falls Amid Rising Fed Rate Cut Bets

(RTTNews) - The U.S. dollar weakened against other major currencies in the early European session on Tuesday, as the U.S. Fed widely expect to lower rates by another quarter point.

Traders are likely to pay close attention to the accompanying for clues about the likelihood of further rate cuts.

CME Group's FedWatch Tool is currently indicating a 97.8 percent chance the Fed will lower rates by a quarter point this week and a 93.0 percent chance of another quarter point rate cut in December.

Traders remain cautious and are reluctant to take major positions ahead of the monetary policy announcements from the European Central Bank, the US Fed and the Bank of Japan this week. Optimism about a potential U.S.-China trade deal and an interest rate cut by the Fed are aiding market sentiment.

In the European trading today, the U.S. dollar fell to an 8-day low of 1.1668 against the euro, a 1-week low of 0.7931 against the Swiss franc and nearly a 3-week low of 0.6565 against the Australian dollar, from early highs of 1.1647, 0.7949 and 0.6547, respectively. If the greenback extends its downtrend, it is likely to find support around 1.18 against the euro, 0.78 against the franc and 0.66 against the aussie.

Against the pound and the yen, the greenback dropped to 6-day lows of 1.3370 and 151.76 from early highs of 1.3337 and 152.74, respectively. The greenback may test support near 1.35 against the pound and 148.00 against the yen.

The greenback edged down to 1.4004 against the Canadian dollar, from an early high of 1.3982. On the downside, 1.38 is seen as the next support level for the greenback.

Looking ahead, U.S. Redbook report, U.S. S&P/Case-Shiller home price index for August, U.S. Richmond Fed manufacturing index for October and U.S. Dallas Fed services index for October is slated for release in the New York session.