The dollar posted its worst performance in nearly three months at the close of trading on Wednesday, Bloomberg reports. The decline occurred after the Federal Reserve cut interest rates by 0.25%, and Federal Reserve Chairman Jerome Powell emphasized labor market risks, downplaying inflation concerns.
The dollar index fell 0.4% to 98.5, its sharpest decline since September 16. However, the index subsequently rebounded 0.1%, reaching 98.75 at the time of writing.
The Swiss franc (+0.8%) and the British pound (+0.7%) led the gains.
Analysts believe the Fed chairman’s comments were the catalyst for the dollar selloff.
“Powell was less optimistic about the labor market than he had previously forecast,” noted Bank of America strategist Alex Cohen.
Despite the Fed forecasting only one rate cut next year, traders are betting on two.
Market attention is now focused on next week, when a raft of macroeconomic data is due, including the consumer price index and employment report for November. The release of these statistics was delayed due to the government shutdown.
Arup Chatterjee, a strategist at Wells Fargo, believes these delayed labor market and inflation data will be “more important” for the dollar’s future trajectory than Wednesday’s Fed meeting.