The US dollar rises to a three-week high as traders lower Fed interest rate cut expectations.

On August 22, forex options indicated that bullish sentiment for the US dollar rose to a three-week high, suggesting that traders are betting that Fed Chairman Powell will not take an overly dovish stance on interest rate cuts.

Traders have recently been adjusting their rate cut bets: the market currently expects the Fed to cut rates by a total of 47 basis points before the end of the year, whereas just a little over a week ago, this expectation was for 63 basis points.

"A 25 basis point rate cut in September - this door will open," said Sonja Marten, head of forex and monetary policy research at DZ Bank AG, in an interview. "But I don't think he will take a more aggressive stance than that."

According to data platforms, the probability of the Fed maintaining interest rates in September is currently 24.5%, while the probability of a 25 basis point rate cut is 75.5%. The probability of the Fed maintaining interest rates in October is 13%, the probability of a cumulative 25 basis point rate cut is 51.5%, and the probability of a cumulative 50 basis point rate cut is 35.5%.