Forex
Dollar gains on safe haven bid; sterling helped by CPI data
Investing.com – The U.S. dollar rose Wednesday, boosted by its safe haven after the US closed its embassy in Kyiv, while sterling outperformed after UK inflation rose more than expected in October.
At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 106.490, bouncing after falling to a one-week low earlier in the session.
The index climbed to its highest level in a year last week in the wake of Donald Trump’s victory in the presidential election, buoyed by expectations for big fiscal spending, higher tariffs and tighter immigration, measures that could foster inflation and potentially slow Federal Reserve easing.
Geopolitics help dollar
The dollar received a boost Wednesday after the United States shut its embassy in Kyiv due to “specific information of a potential significant air attack.”
This warning came a day after Ukraine used US missiles to strike Russian territory, and Russian President Vladimir Putin changed the threshold for the use of his country’s nuclear arsenal.
The developments threaten to drag the West even further into the conflict between Russia and Ukraine, resulting in demand for the dollar.
“So far, this has translated to some noise in the FX market, but no big moves,” said analysts at ING, in a note.
“We suspect the dynamics in dollar crosses were partly still affected by the dollar’s overbought positioning status, which may have contributed to curbing geopolitics-related gains.”
With little on the economic data slate Wednesday, investors will focus on commentary from Federal Reserve Governors and , as well as Boston Fed President for clues of future Fed monetary policy decisions.
Traders continue to pare back expectations for an interest-rate cut at the Fed’s next meeting in December. Odds now stand at 58.9%%, down from 82.5% a week ago, according to CME’s .
UK inflation surprises to upside
In Europe, fell 0.1% to 1.2671, trading marginally lower due to the strength of the US dollar even as UK CPI data was stronger than expected in October, casting doubt about a rate cut by the Bank of England in December.
Consumer prices rose by an 2.3% last month, above the 2.2% rise expected, and by 0.6% on a basis in October, the biggest month-to-month rise in the annual CPI rate since October 2022.
This rise comes before the impact of the first budget of Britain’s new government, which included higher taxes on companies, is felt.
The Bank of England said the budget was likely to add to inflation next year, and Governor Andrew Bailey on Tuesday stressed the central bank’s message that borrowing costs are likely to come down only gradually.
“Even if there is another inflation print before the next BoE meeting, we would probably need a sharp slowdown in services inflation to put a cut back on the table,” ING added.
traded 0.3% lower to 1.0560, with the expected to continue cutting interest rates given the lack of serious growth in the region while inflation has fallen back to target.
ECB policymaker Fabio Panetta said on Tuesday the central bank should cut interest rates so they no longer curb economic growth, or so they even stimulate it, and give more guidance now that post-pandemic shocks are abating and inflation is normalising.
“With inflation close to target and domestic demand stagnant, restrictive monetary conditions are no longer necessary,” he said.
PBoC keeps rates unchanged
rose 0.7% to 155.80, with the Japanese yen remaining fragile after Japan reported a bigger-than-expected in October.
The focus is now turning to upcoming data from the country on Friday.
climbed 0.1% to 7.2462, hovering around three-month highs.
The People’s Bank of China left its benchmark unchanged as widely expected, after trimming the rate last month.
Wednesday’s hold came on the heels of several more stimulus measures from China since late-September, although Beijing is yet to unlock more targeted fiscal measures.
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.
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
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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