Global Market Fluctuations: Dollar, Cryptocurrencies, and More

The dollar neared a yearly low, while sterling traded near multi-year highs. Markets focused on potential U.S. interest rate cuts. Bitcoin dropped over 4%, and the Australian dollar rose. Muted movements were observed as traders awaited economic clues. A strong upside PCE surprise is needed to alter multiple Fed cut expectations.

The dollar held near its lowest point in more than a year against a basket of peers on Wednesday, with sterling just off multi-year highs. Markets concentrated on clues regarding the potential size of a widely anticipated U.S. interest rate cut next month.

Cryptocurrency bitcoin took the spotlight in Asia, plummeting over 4% after breaking below support around $60,000. Meanwhile, the Australian dollar surged to an eight-month high after data indicated domestic inflation slowed to a four-month low in July. However, the general progress on tempering price gains was disappointing. "The Reserve Bank of Australia is unlikely to pivot in the September meeting, which might strengthen the AUD temporarily," said Charu Chanana, Saxo's head of FX strategy.

Elsewhere, overall movements in the foreign exchange market were muted as traders awaited new signals about the state of the world's largest economy. Markets are fully priced for a 25-basis point cut, with a preliminary estimate for U.S. GDP and core PCE index data due later this week. A strong PCE upside surprise is needed to counter expectations of multiple Fed cuts. The dollar index was last 0.2% higher at 100.78, hovering above a 13-month low.

(With inputs from agencies.)