Market analysis: If the Federal Reserve expects to cut interest rates once this year, the dollar may strengthen

Financial website Fxstreet analyzed that the Federal Reserve is widely expected to maintain its policy setting unchanged for the fourth consecutive meeting. Currently, the odds of the Federal Reserve cutting interest rates for the first time of the year in September are about 70%. Therefore, the revisions in the dot-matrix chart, as well as comments from US Powell, could provide key clues to the timing and frequency of rate cuts. If the revised economic forecast shows that policymakers still expect a total of 50 basis points of rate cuts this year, the dollar could resume selling pressure in an immediate reaction. Downgrades to GDP growth and/or inflation expectations could exacerbate the dollar sell-off. Conversely, if the dot-matrix highlights that officials now expect only one rate cut this year, the dollar could strengthen. Investors now expect a roughly 70 per cent chance that the Fed will cut interest rates at least twice in 2025, a market positioning that suggests the dollar has strong bullish potential in the event of a hawkish surprise.