Dollar At Lows Ahead of PMIs

USD Under PressureThe Dollar Index is on course to end the week at its lowest level since August having shed around 2.4% since Monday’s opening price. The main driver behind the move lower this week was the December FOMC meeting on Wednesday. While the Fed held rates steady as expected, the accompanying outlook and projections were more dovish than many anticipated. The Fed signalled for the first time that rate cuts are seen next year, with the dot plot forecasts currently projecting three quarter-point cuts through the year.Dovish Fed SignalsAlongside this outlook, the Fed noted that easing discussions were in very early stages and tightening could still be used if needed. However, the market is now pricing in an initial hike by March with this date likely to be brought forward if we see fresh downside in inflation over coming months.Rate Cut Timing Now KeyIndeed, while speculation over the last few months was centered around whether the Fed would cut, focus has now moved on to timing the first rate cut. While this narrative remains in place, USD looks likely to continue lower on any fresh data undershoots. Looking ahead today, flash PMIs for December will be the key focus.Technical ViewsDXYThe sell off in DXY has seen the market breaking back below the 103.48 level and below the November lows. Price is now fast approaching a test of the 101.22 level and with momentum studies bearish, the outlook remains in favour of further downside unless bulls can get back above 103.48.