Forex
Dollar pares gains on soft US inflation data
© Reuters. U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
By Karen Brettell
NEW YORK (Reuters) – The pared gains on Friday after U.S. producer prices unexpectedly fell in December, raising expectations of an early U.S. rate cut.
It was higher on the day, boosted by safety buying after U.S. and British warplanes, ships and submarines launched dozens of air strikes across Yemen overnight.
The producer price index for final demand dipped 0.1% last month, after a decline in the cost of goods, while prices for services were unchanged, increasing the chances of lower inflation in the months ahead.
That led traders to add to bets for a rate cut in the coming months. Fed funds futures now imply a 79% chance of a March rate cut, up from 73% on Thursday, according to the CME Group’s (NASDAQ:) FedWatch Tool.
“Even though you wouldn’t say overall that the macroeconomic picture is screaming at you that they need to cut that fast, the market seems to be excited about the prospect of cuts,” said Steve Englander, head of Global G10 FX Research and North America Macro Strategy at Standard Chartered (OTC:) Bank NY Branch.
Traders maintained their view that a March rate cut is likely even after consumer price inflation data on Thursday came in above economists’ expectations. Last week’s jobs report for December also showed strong jobs growth, though underlying details of the report were mixed.
The dollar index was last up 0.19% at 102.40.
The New Zealand and Australian currencies were among the best performers after Friday’s data, but pared gains later in the day.
“If this is a trade, it’s going to be the higher beta currencies that respond the most and take comfort that the market’s clearly hot to trot on the Fed cutting. As long as that’s the perception in the market, I think the higher yielders will do very well,” Englander said.
The was last up 0.22% on the day at $0.62460. The was little changed at $0.66870.
Foreign exchange moves were likely tempered by traders closing positions ahead of a U.S. long weekend, with markets closed on Monday for the Martin Luther King Jr. holiday.
The U.S. currency benefited earlier from risk aversion after the strikes on Yemen, which came in retaliation for attacks by Iran-backed Houthi forces on Red Sea shipping, widening regional conflict stemming from Israel’s war in Gaza.
The Norwegian krone also gained as oil prices increased on the rising geopolitical tensions. The U.S. dollar was last down 0.25% at 10.29 krone.
The euro, which is among the most exposed regions to higher energy costs, dipped 0.15% to $1.09555.
The dollar fell 0.29% against the Japanese yen to 144.87.
Sterling dropped 0.12% to $1.27470 after data on Friday showed that Britain’s economy grew slightly more than expected in November but remains at risk of a mild recession.
In cryptocurrencies, bitcoin last stood at $43,643, down more than 5%, having surged to a two-year high of $49,051 on Thursday after the U.S. Securities and Exchange Commission on Wednesday gave the green light to offer ETFs linked to bitcoin.
Forex
Dollar bounces after sharp loss; euro retreats on Lagarde comment
Investing.com – The US dollar edged higher Monday, rebounding after the sharp losses at the end of last week on signs of cooling inflationary pressures, while the euro slipped following dovish comments from ECB head Christine Lagarde.
At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% higher to 107.750, after falling sharply from a two-year high on Friday.
Dollar bounces after sharp retreat
The dollar bounced Monday after falling sharply on Friday as the Federal Reserve’s preferred showed moderate monthly rises in prices, with a measure of underlying inflation posting its smallest gain in six months.
That eased some concerns about how much the may cut in 2025, which had risen following the hawkish US rate outlook after the last Fed policy meeting of the year.
That said, traders are pricing in 38 basis points of rate cuts next year, shy of the two 25 bp rate cuts the Fed projected last week, with the market pushing the first easing of 2025 out to June, with a cut in March priced at around 53%.
Trading volumes are likely to thin out as the year-end approaches, with this trading week shortened by the festive period.
Eurozone “very close” to ECB inflation goal
In Europe, fell 0.1% to 1.0414, near a two-year low it touched in November, down 5.5% this year, after European Central Bank President said the eurozone was getting “very close” to reaching the central bank’s medium-term inflation goal.
“We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%,” Lagarde said in an interview published by the Financial Times on Monday.
Earlier in December, Lagarde had said the central bank would cut interest rates further if inflation continued to ease towards its 2% target, as curbing growth was no longer necessary.
The lowered its key rate last week for the fourth time this year, and is likely to cut interest rates further in 2025 if inflation worries fade.
traded largely flat at 1.2571, after data showed that Britain’s economy failed to grow in the third quarter, adding to the signs of an economic slowdown.
The Office for National Statistics lowered its estimate for the change in output to 0.0% in the July-to-September period from a previous estimate of 0.1% growth.
The ONS also cut its estimate for growth in the second quarter to 0.4% from a previous 0.5%.
policymakers voted 6-3 to keep interest rates on hold last week, a bigger split than expected, amid worries over a slowing economy.
Yuan hits one-year high
In Asia, rose 0.2% to 156.72, after rising as far as 158 last week following dovish signals from the .
The BOJ signaled that it was not considering interest rate hikes in the near-term despite a recent pick-up in inflation, and could raise rates by as late as March 2025.
edged 0.2% higher to 7.3080, hitting a one-year high as traders continued to fret over China’s economic outlook. While Beijing is expected to ramp up fiscal spending in the coming year to support the economy, looser monetary conditions are expected to undermine the yuan.
Forex
Asia FX muted, dollar slips from 2-yr high on soft inflation data
Investing.com– Most Asian currencies moved little on Monday, while the dollar steadied from a tumble from over two-year highs after soft U.S. inflation data spurred some hopes that interest rates will still fall in 2025.
Asian currencies were nursing steep losses against the dollar from last week, although they trimmed some declines on Friday after the soft inflation data. The outlook for regional markets also remains clouded by uncertainty over U.S. interest rates and policy under incoming President Donald Trump.
Dollar slips from 2-yr high as PCE data misses expectations
The and both steadied on Monday after clocking sharp losses on Friday.
The greenback slid from an over two-year peak after data- the Federal Reserve’s preferred inflation gauge- read softer-than-expected on Friday.
Still, the reading remained above the Fed’s 2% annual target, keeping uncertainty over interest rates in play.
The Fed had cut interest rates by 25 basis points last week, but flagged a slower pace of interest rate cuts in the coming year, citing concerns over sticky inflation and resilience in the labor market.
The Fed is expected to cut rates twice in 2025, although the path of rates still remains uncertain.
Markets took some relief from the government avoiding a shutdown after lawmakers approved an eleventh-hour spending bill.
Asia FX pressured by rate uncertainty
Despite clocking some gains on Friday, most Asian currencies were still trading lower for December, as the outlook for interest rates remained uncertain.
The Japanese yen’s pair rose 0.1% to around 156.59 yen, after rising as far as 158 yen last week following dovish signals from the Bank of Japan.
The BOJ signaled that it was not considering interest rate hikes in the near-term despite a recent pick-up in inflation, and could raise rates by as late as March 2025.
The Chinese yuan’s pair rose 0.1%, hitting a one-year high as traders continued to fret over China’s economic outlook. While Beijing is expected to ramp up fiscal spending in the coming year to support the economy, looser monetary conditions are expected to undermine the yuan.
The Singapore dollar’s pair was flat ahead of inflation data due later in the day, while the South Korea’s won’s pair rose 0.3%.
The Australian dollar’s pair rose slightly after sinking to a two-year low last week.
The Indian rupee’s pair steadied after hitting a record high of over 85 rupees last week.
Forex
Dollar to weaken less than expected next year: UBS
Investing.com — The dollar recently notched fresh year-to-date highs against its rivals and is likely to remain strong after the Federal Reserve leaned more hawkish at its recent December meeting, analysts from UBS said in a recent note.
“While we still expect the dollar to fall, we now see less weakness in 2025 given these factors and adjust our forecasts slightly,” analysts from UBS said in a recent note.
The less bearish view on the USD comes in the wake of the greenback making fresh year-to-date highs in key exchange rates and the expectations for fewer U.S. rate cuts.
“The USD has been driven lately by prospects of fewer Fed rate cuts and tariff risks,” the analysts said.
The euro has been particularly affected by dollar strength, but is expected to trade around $1.05 against the greenback in the first half of 2025, the analysts forecast.
But a significant drop toward parity for the can’t be ruled out, “due to real tariff threats or further divergence in the macro backdrop between the US and Europe,” the analysts added.
Still, any move toward parity should be short-lived, the analysts said, amid expectations for the economic backdrop in Europe to improve in the second half of the year, narrowing the divergence between Europe and U.S. yields.
“The trajectory back into the middle of the trading range or higher, 1.08 to 1.10, comes with the view that two-year yield differentials will still narrow to some degree and better macro data out of Europe provide some underlying support for EURUSD in 2H25,” the analysts said.
- Forex2 years ago
Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Unbiased review of Pocket Option broker
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China
- Forex2 years ago
The dollar is down again against major world currencies