US Dollar Drops to Three-Month Low Amid Weaker Home Sales Data and Rate Cut Expectations

According to Yahoo News, the US dollar dipped to a three-month low against peer currencies on Tuesday, following weaker-than-expected new home sales data and increasing bets that the Federal Reserve could begin cutting interest rates in the first half of next year. US new home sales fell 5.6% to a seasonally adjusted annual rate of 679,000 units in October, below the 723,000 units expected by economists polled by Reuters, causing Treasury yields to decline. The dollar index, which measures the greenback against a basket of currencies, reached 103.11, its lowest since August 31. The dollar is on track for a loss of over 3% in November, marking its worst performance in a year. Market expectations that the Fed's rate increase cycle has come to an end have also contributed to the downward pressure on the greenback. US rate futures indicate a 25% chance that the Fed could begin cutting rates as early as March, increasing to nearly 45% by May, according to the CME FedWatch tool. Traders are now focusing on the US core personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation, this week for further confirmation that inflation in the world's largest economy is slowing. PCE is among several key economic events this week, including Chinese purchasing managers' index (PMI) data and the OPEC+ decision.