Forex

Dollar steadies near one-month high; Sterling gains on hot inflation data

Published

1 year ago

January 17, 2024

Dollar steadies near one-month high; Sterling gains on hot inflation data

Investing.com – The U.S. dollar steadied at a one-month high amid increasing doubts over early interest rate cuts by the Federal Reserve, while sterling climbed on hot inflation data.

At 04:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 103.247, just below the 103.55 level seen earlier Wednesday, its highest level since Dec. 13.

Dollar helped by rate cut uncertainty

The greenback received a boost late Tuesday after Federal Reserve Governor said that while interest rate cuts were likely to happen this year, the central bank was not considering any in the near-term, citing continued resilience in the U.S. economy.

Uncertainty over when the Fed will start cutting interest rates has helped the dollar rebound this year after being hard hit at the end of 2023 in the wake of the Fed’s dovish turn at the December FOMC meeting.

Market expectations of a rate cut in March have eased to a 62.2% chance versus an 76.9% view in the prior session, according to CME’s FedWatch Tool.

U.S. are due for release later Wednesday, and will be closely watched for indications that consumer spending – a major driver of economic growth – is remaining resilient in the face of elevated interest rates.

Sterling climbs on inflation surprise

In Europe, rose 0.2% to 1.2657 after U.K. rose for the first time in 10 months in December, increasing to 4.0% on an annual basis from a more-than-two-year low 3.9% in November.

This resulted in traders pared back expectations for interest rate cuts over the coming months, with inflation proving to be more sticky than previously anticipated.

dropped 0.1% to 1.0868, near a one-month low despite hawkish comments from a number of European Central Bank policymakers over the need to complete the job of taming inflation.

Eurozone is expected to be confirmed later in the session as rising to 2.9% in December, from 2.4% the prior month, reversing six months of consecutive falls.

Yuan falls after disappointing Chinese growth data

In Asia, rose 0.1% to 7.1969, with the yuan retreating after data showed that grew slightly less than expected in the fourth quarter, and barely edged past government estimates of 5% for growth in 2023.

The reading showed that a post-COVID rebound gained little momentum over the past year, and set a middling tone for China in 2024.

traded 0.5% higher to 147.90, with the yen weakening past the 147 level for the first time in more than a month after a 1% tumble in overnight trade.

The yen was also dented by increasing expectations that the will maintain its ultra-dovish course when it meets next week, especially in the wake of the recent devastating earthquake.

Forex

PBoC adjusts policy amid rising USD demand

Published

3 hours ago

January 23, 2025

The People’s Bank of China (PBoC) responded to increasing demand for the US dollar by adjusting its cross-border macroprudential parameter.

The central bank’s decision to raise the parameter from 1.50 to 1.75 allows domestic corporations and financial institutions to engage in more cross-border borrowing.

The adjustment came as the foreign exchange settlement balance for banks’ clients showed a deficit of $10.5 billion, marking the first negative reading since July 2024. This deficit contrasts with the previous month’s figures. The rise in demand for the US dollar was particularly noticeable in service trade transactions.

Recent weeks have seen domestic importers actively purchasing US dollars through foreign exchange forwards. This move is a strategy to hedge against potential risks associated with tariffs, which has contributed to an upward push on forward points.

The PBoC’s policy change on January 13 reflects efforts to manage market expectations regarding foreign exchange rates.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Forex

Macquarie sees stable USD/CAD trend, eyes 1.35 mid-year target

Published

3 hours ago

January 23, 2025

On Wednesday, Macquarie analysts provided insights into the potential future movements of the Canadian dollar (CAD) against the US dollar (USD).

They indicated that the fears of heavy-handed US import tariffs are unlikely to materialize immediately after the inauguration, suggesting that the USD’s rally against the EUR, CAD, and other currencies might not extend beyond the first quarter of the year.

The analysts highlighted that despite the initial threats of tariffs, Canada is expected to grow even closer to the United States in the coming years. This projection is based on several factors including Canada’s domestic politics, foreign policy, border and immigration policies, as well as trade and capital account flows, all of which demonstrate aligned interests with the US. The anticipated renegotiation of the United States-Mexico-Canada Agreement (USMCA) is expected to cement this relationship further.

According to Macquarie, this closer relationship between Canada and the US will lead to a much more stable exchange rate in the future. They predict that as a result of these developments, the USD/CAD pair will experience a downward drift, potentially reaching a mid-year target of 1.35.

The stability in the USD/CAD exchange rate is seen as a reflection of the ‘merger trend’ context, where the two economies continue to integrate and align, leading to less exchange rate fluctuation. Macquarie’s analysis projects a calmer period ahead for the currency pair, which has historically been influenced by trade policies and geopolitical factors.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Forex

Dollar edges higher; Trump’s speech at Davos in spotlight

Published

3 hours ago

January 23, 2025

Investing.com – The US dollar lifted slightly Thursday, but remained in a tight trading range ahead of a speech by President Donald Trump at the World Economic Forum.

At 04:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 108.150, after starting the week with a drop of over 1%.

Dollar treads water

The dollar has largely treaded water over the last couple of days as traders await more clarity over President Donald Trump’s plans for tariffs, following the sharp fall on Monday as his first day in office brought a barrage of executive orders, but none on tariffs.

He has subsequently talked about levies of around 25% on Canada and Mexico and 10% on China from Feb. 1, as well as mentioning duties on European imports, but without concrete action.

Trump speaks later in the session at the World Economic Forum in Davos, Switzerland, and traders are eagerly awaiting any comments on this topic as well as for his position on major geopolitical and economic issues such as the Ukraine-Russia war and the economic rivalry with China.

“This week’s dollar correction has not gone too far. Despite the heavy one-way positioning of the dollar, investors lack clarity on the timing of Trump’s tariff threats, preventing them from reducing dollar holdings,” said analysts at ING, in a note.

Also causing traders to pause for breath is the spate of central bank policy decisions due over the next week, including the on Friday, ahead of the and the next week.

Euro lower ahead of ECB meeting

In Europe, slipped 0.1% lower to 1.0404, with the single currency weak ahead of next week’s ECB meeting, with an interest rate cut largely seen as a done deal.

“This week’s EUR/USD bounce has been pretty muted so far,” said ING. “There is no way investors can expect to hear an ‘all-clear’ signal on tariffs. And keeping trading partners off balance/guessing is a tactic that kept the dollar reasonably well bid during Trump’s last tariff regime in 2018-19.”

traded 0.1% lower to 1.2304, while rose 0.2% to 11.3035 ahead of a policy-setting meeting by the later in the session.

“Norges Bank is widely expected to keep rates on hold today,” ING said. “On the whole, the key variables monitored by NB have not clearly argued a rate cut should be pushed beyond March. Also, the risks to global growth related to Trump’s protectionism plans should encourage policymakers to allow some breathing room with a rate cut before the end of the first quarter.”

BOJ meeting to conclude Friday

In Asia, traded largely unchanged at 156.47, ahead of the Bank of Japan’s two-day policy meeting, which concludes on Friday.

The BoJ is widely expected to raise interest rates as recent inflation and wage data have been encouraging, and the central bank is likely to signal further interest rate hikes if the economy maintains its recovery

traded 0.2% higher to 7.2877, with the Chinese currency weaker on fears Trump will confirm US tariffs on Chinese imports, hitting the second largest economy in the world.