USD Edges Lower as Broader Market Sentiment Softens – Scotiabank

USD Edges Lower, Broader Sentiment Softens – Scotiabank

The US Dollar (USD) is experiencing modest weakness today as quiet market conditions prevail, influenced by the upcoming North American holiday (Memorial Day on Monday) and the recent Canadian holiday. Scotiabank’s Chief FX Strategist, Shaun Osborne, notes the lower participation in the market.

USD Weakens Amid Global Rate Cuts

The Australian Dollar (AUD) traded lower after the Reserve Bank of Australia (RBA) implemented a dovish rate cut, reducing the cash rate by 25 basis points to 3.85%. This reduction in growth and inflation forecasts signals further easing, which is putting additional pressure on the AUD. The People's Bank of China (PBoC) also joined the rate-cutting trend, lowering two key benchmark rates to record lows. This further contributed to AUD and NZD weakness.

High Beta Currencies See Gains

Meanwhile, high-beta currencies such as the Mexican Peso (MXN) and South African Rand (ZAR) recorded intraday gains against the USD. Asian and European equities showed positive movements, but US equity futures were down, indicating concerns about the sustainability of the recent market upturn.

Economic Concerns Weigh on USD

Trade uncertainty remains high, with investor caution growing over the slowing US economic momentum. The recent US sovereign credit downgrade added pressure on the USD, amplifying concerns about the US’s fiscal outlook. Despite the market’s general indifference to the downgrade, the weak trend in US debt and ongoing uncertainties from President Trump's tariff policy suggest a slowing US economic recovery.