Dollar Falls On Fed Rate Cut Expectations, Recession

The dollar is lower in early trade Thursday as President Bush warned the U.S. may face a "painful" recession and traders bet on a Federal Reserve interest-rate cut next month.

The odds of the Fed lowering its 2 percent benchmark rate by a quarter-percentage point at its next Oct. 29 policy meeting were 80 percent yesterday, compared with 58 percent on Sept. 23, futures contracts on the Chicago Board of Trade showed.

Bush said in an address to the nation that without the rescue the U.S. will suffer "a long and painful" recession.

US housing data out later today is expected to show home sales declining, extending the worst housing slump in 17 years.

At 7.40am BST the dollar was $1.8621 against the pound from $1.8465, and $1.4760 against the euro from $1.4621 late in New York yesterday.