Forex
Dollar boosted by rising Treasury yields; euro slips on weak data
Investing.com – The US dollar rose Wednesday, benefiting from rising bond yields after the release of healthy US economic data, while weak German industrial orders weighed on the euro.
At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher to 108.690.
Dollar gains as Treasury yields soar
The dollar has continued to push ahead Wednesday, following on from the prior session’s positive tone after data showed US unexpectedly rose in November, layoffs were low, while services sector activity accelerated in December and a measure of prices paid for inputs hit a two-year high.
This resulted in 10-year Treasury yields climbing to an eight-month high, while the benchmark 30-year yield came close to the 5% level.
“Yesterday’s US data releases were hawkish for the Fed, and the implied probability of a March rate cut has now dropped below 40%,” said analysts at ING, in a note.
“The most remarkable print was the ISM prices paid subcomponent, which spiked to the highest level since January 2023. If a generally resilient economy was already accounted for when the Fed met in December, a resurgence in inflation concerns could drive an even further hawkish tuning in the policy message.”
The Federal Reserve cut the number of rate cuts it sees this year to two at its December meeting, but traders are now only pricing in around 37 bps of easing through this year, according to LSEG data.
There is more data to digest Wednesday, in the form of the monthly and weekly , ahead of Friday’s release of the closely watched US for further clarity on the health of the world’s largest economy.
German economic weakness weighs on euro
In Europe, fell 0.2% to 1.0326, adding to the losses of around 0.5% overnight after the release of more disappointing economic data from the region’s largest economy – Germany.
fell 5.4% in November, sapped by a decline in large orders, while the country’s fell 0.6%, bursting hopes for a boost from pre-Christmas promotions like Black Friday and Cyber Monday.
Investors are currently looking for the to ease interest rates by around 100 basis points in the first half of 2025.
“There is only a speech by French central bank governor Villeroy to watch in the eurozone calendar today. EUR/USD may find decent support at 1.0300 for now,” said ING.
traded 0.2% lower to 1.2447, with little in the way of economic data due for release Wednesday, and only a speech from Bank of England Deputy Governor Sam Woods to digest.
The held interest rates unchanged last month, and is expected to proceed cautiously with further rate cuts this year with inflation still above target.
Yuan sentiment remains weak
In Asia, rose 0.1% to 7.3511, with the Chinese currency hitting its weakest level in 17 years earlier in the week.
Sentiment remains weak surrounding China ahead of President-elect Donald Trump’s inauguration on Jan. 20, with Trump having vowed to impose steep trade tariffs on China.
gained 0.1% to 158.19, after recovering marginally from its weakest level in nearly six months.
The yen stemmed its recent losses after government officials offered a verbal warning on potential currency market intervention, which saw traders adopt more caution in shorting the Japanese currency.
Forex
Dollar retains strength ahead of payrolls; sterling slips again
Investing.com – The US dollar edged higher Friday, holding on to recent gains ahead of the release of the highly influential monthly jobs report, while sterling continued to retreat.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 109.040, on course for a weekly gain of 0.3%.
This would be its sixth consecutive weekly gain, its longest run since an 11-week streak in 2023.
Dollar retains strength ahead of payrolls
The dollar traded near its strongest levels since November 2022, holding on to recent gains as the US returned from a holiday to honor former President Jimmy Carter.
The focus was squarely on data for December, due later in the session, as traders look for more cues on the US economy and the future path of interest rates.
The of the Fed’s December meeting, released on Wednesday, showed policy makers remain concerned over the potential for inflation to flare up again, especially given the likely impact of the expansionary and protectionist policies under President-elect Donald Trump.
US nonfarm payrolls data is expected to show the economy added 154,000 jobs in December on top of the 227,000 in November, with holding at 4.2%.
Anything stronger would add to the case for fewer Federal Reserve rate cuts in 2025, boosting the dollar.
“We think the balance of risks is tilted to the upside for the dollar today, as robust jobs figures could prompt markets to price out a March cut and potentially push the first fully-priced move beyond June,” said analysts at ING, in a note.
“We would still argue that with inflation concerns back on the rise – although the Fedspeak has been quite heterogeneous on that topic – next Wednesday’s CPI report could have deeper market ramifications.”
Sterling set for hefty weekly loss
In Europe, edged higher to 1.0303, helped by data showing that rose 0.2% on the month in November, an improvement from the prior month’s drop of 0.3% and above the fall of 0.1% expected.
That said, the euro remains weak, with the European Central Bank widely expected to ease interest rates by around 100 basis points in 2025, around double the cuts expected by the US central bank, with the regional economy still very weak.
“Markets are pricing a good deal of negatives into the euro at this stage, and perhaps the euro may be penalised less than other G10 currencies should US payrolls come in strong today,” ING added.
traded 0.2% lower to 1.2285, with sterling on course to lose 1% this week after earlier falling to a 14-month low following a selloff in UK government bonds amid concern about British finances.
“We expect higher yields to act as an additional headwind to growth via household remortgaging and weaker investment,” said analysts at Goldman Sachs, in a note.
“The rise in gilt yields reinforces our view that UK growth will disappoint in 2025, with our 0.9% real GDP growth forecast notably below consensus (1.4%), the BoE (1.5%) and the OBR (2%).”
Yuan lacks support
In Asia, rose 0.3% to 7.3513, with the Chinese currency seeing continued weakness after soft inflation data for December, released earlier in the week.
The prospect of trade tariffs under Trump also soured sentiment towards China.
dropped 0.1% to 157.85, with the Japanese currency helped by the release of stronger-than-expected data earlier Friday.
This followed on from a bigger-than-expected increase in wage growth on Thursday, and has sparked increased speculation over a January interest rate hike by the Bank of Japan.
Forex
US dollar bounces back as strong jobs data backs Fed rate-cut pause
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The U.S. dollar rallied across the board on Friday after data showed the world’s largest economy created more jobs than expected last month, reinforcing expectations that the Federal Reserve will pause its rate-cutting cycle at its policy meeting later this month.
The dollar rose to its highest since July against the yen after the data and was last up 0.1% at 158.27 yen. The U.S. currency has risen in five of the last six weeks.
The euro, on the other hand, dropped to its lowest since November 2022 versus the greenback. The single euro zone currency was last down 0.6% at $1.024, falling for a second straight week.
A significant number of foreign exchange forecasters expect the euro to reach parity with the dollar in 2025, a Reuters poll showed this week.
A Labor Department report showed the U.S. economy added 256,000 jobs in December, much higher than economists’ forecasts for an increase of 160,000. The November jobs number was revised downward to 212,000.
The unemployment rate, meanwhile, dipped to 4.1%, compared with expectations of a 4.2% reading, while average hourly earnings increased 0.3% last month after gaining 0.4% in November. In the 12 months through December, wages advanced 3.9% after rising 4.0% in November.
“I think this will only encourage a continuation of the U.S. dollar upside that has been the market’s bias for a while, certainly serves to reinforce the U.S. exceptionalism theme, and should keep the Fed relatively hawkish compared to peers in the G10 space,” said Michael Brown, senior research strategist, at Pepperstone in London.
Following the nonfarm payrolls number, the U.S. rate futures market has fully priced in a pause in the Fed’s easing cycle at the January meeting, according to LSEG estimates. The market has also priced in just 31 basis points of easing in 2025 or just one rate cut, with the first rate move likely at the June meeting.
In other currencies, sterling tumbled to its weakest level since November 2023 against the dollar, and last changed hands at $1.2247, down 0.5%. It was sold off as well on Thursday in tandem with a selloff in gilt and concern about British government finances.
In Japan, prospects of sustained wage gains and the boost to import costs from a weak yen have heightened attention within the central bank to rising inflationary pressures that may lead to an upgrade in its price forecast this month, sources said.
The , meanwhile, advanced to its highest since November 2022, and was on track for a sixth consecutive weekly gain. That’s its longest run since an 11-week streak in 2023. The index was last up 0.2% at 109.48.
Currency
bid
prices at
10
January
02:44
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 109.39 109.2 0.17% 0.83% 109.97 109.
index 07
Euro/Doll 1.0271 1.0299 -0.27% -0.78% $1.0312 $1.0
ar 212
Dollar/Ye 157.74 158.105 -0.19% 0.29% 158.86 157.
n 645
Euro/Yen 162.06 162.85 -0.49% -0.71% 163.18 162.
05
Dollar/Sw 0.9149 0.9123 0.3% 0.83% 0.9189 0.91
iss 15
Sterling/ 1.2246 1.2307 -0.48% -2.08% $1.2323 $1.2
Dollar 194
Dollar/Ca 1.4394 1.4392 0.02% 0.1% 1.4437 1.43
nadian 76
Aussie/Do 0.6167 0.6198 -0.46% -0.3% $0.6206 $0.6
llar 139
Euro/Swis 0.9396 0.9393 0.03% 0.03% 0.9419 0.93
s 86
Euro/Ster 0.8384 0.8365 0.23% 1.34% 0.8393 0.83
ling 66
NZ 0.5567 0.56 -0.58% -0.51% $0.5603 0.55
Dollar/Do 43
llar
Dollar/No 11.4159 11.3944 0.19% 0.44% 11.5117 11.3
rway 921
Euro/Norw 11.7266 11.7186 0.07% -0.36% 11.791 11.7
ay 174
Dollar/Sw 11.1842 11.1538 0.27% 1.52% 11.2547 11.1
eden 36
Euro/Swed 11.4879 11.4881 0% 0.18% 11.5053 11.4
en 75
Forex
Time to short dollar as latest surge suggest ‘Trump trade’ now priced in
Investing.com — The surged to multi-year highs on Friday, hitting a level that an expert said would mark the pricing in of the ‘Trump Trade,’ leaving little room for further upside and creating an opportunity to turn bearish on the greenback.
The jumped 0.5% to to 109.67, and had earlier hit 109.91 — its highest level since November 2022.
“Start selling the dollar if our DXY 110 target is breached. Slowing global growth and a relatively more hawkish Fed have been priced in. So is a Donald Trump presidency,” Chester Ntonifor, Foreign Exchange/Global Fixed Income Strategist at BCA Research, said in a note.
The firm argues that this level would have fully priced in the “Trump-trade” and would be initiated from significantly overvalued levels.
The call for a weaker dollar comes as the strategist believes that “the bout of strength in US inflation, especially relative to other markets, is in its last innings,” amid expectations for a U.S. slowdown.
While the latest jobs report for December signaled little sign of a slowdown, Ntonifor sees the risk of the U.S. economy slowing due to “tightening financial conditions in the US.”
Looking ahead, Ntonifor suggested that a potential scenario could unfold later this year where “equity markets correct, the US dollar declines, and bond yields fall.”
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