Expectations of sooner Fed cut send US dollar down

The greenback dropped as expectations grew of sooner monetary easing in the US. The Bloomberg dollar index fell 0.2% to a record low since April 2022.

The decline came after the Wall Street Journal reported that President Donald Trump could announce a new Federal Reserve (Fed) head as early as September or October. Current Chairman Jerome Powell's term ends in May 2026.

Traders see the news as a signal that an early cut in interest rates is getting more likely, given the US president's repeated calls for monetary easing. Market participants are now pricing in a 66-basis-point reduction in borrowing costs by year-end, up from 51 basis points last week, Bloomberg says.

According to the Wall Street Journal, candidates for the new central bank head include US National Economic Council director Kevin Hassett and Fed governor Kevin Warsh. 

Matthew Haupt of Wilson Asset Management believes the announcement of the next Fed chairman will make Powell less influential, as all eyes will be on the new head.