Market Analysis: If the Fed Signals Only One Rate Cut This Year, the Dollar May Strengthen

According to a report by Jinse Finance, financial website Fxstreet analyzes that it is widely expected the Federal Reserve will keep its policy settings unchanged for the fourth consecutive meeting. Currently, the probability of the Fed making its first rate cut of the year in September is about 70%. Therefore, revisions in the dot plot and comments from Fed Chair Powell may provide key clues regarding the timing and frequency of rate cuts. If the revised economic projections show that policymakers still expect a total rate cut of 50 basis points this year, the US dollar may face renewed selling pressure in the immediate aftermath. A downward revision in GDP growth and/or inflation expectations could further intensify the dollar's sell-off. Conversely, if the dot plot highlights that officials now expect only one rate cut this year, the dollar may strengthen. Investors currently estimate there is about a 70% chance the Fed will cut rates at least twice in 2025. This market positioning suggests that if a hawkish surprise occurs, the dollar will have strong bullish potential.