US Dollar Index (DXY) dives below 97.00 as investors brace for the Fed

• The US Dollar dives further and reaches fresh two-month lows below 97.00.
• The market is positioning for a series of Fed cuts, and the US Dollar struggles.
• Later today, US Retail Sales are expected to show that consumption eased in August.

The US Dollar is extending losses on Tuesday, trading about 1.20% lower from last week's highs as investors position for a "dovish cut" by the Fed on Wednesday. The Index broke below late July lows at the 97.10 area and is testing levels below 97.00 ahead of the US Retail Sales release.

Later today, August's retail consumption data is expected to show a slowdown to 0.2%, from the 0.5% reading seen in the previous month. Excluding autos, sales of all other products are seen accelerating to 0.4% in August from 0.3% in July.

These figures are not expected to alter the view that the Federal Reserve will cut interest rates by 25 basis points after a two-day meeting starting today, and highly likely hint at further easing down the road.

Futures markets are nearly fully pricing a quarter-point cut on Wednesday and an almost 70% chance of two more rate cuts in the subsequent two meetings before the year-end. All in all, the higher probability that Fed's Powell will prioritise the labour market before inflation, and accelerate the easing cycle, has boosted risk appetite, sending the US Dollar lower across the board.