Feb 6, 2024: In Tuesday’s trading, the dollar saw a slight decline against major currencies, yet remained near its highest level in nearly three months, supported by robust economic data and a hawkish stance on interest rates from Federal Reserve officials.
Strong U.S. economic indicators, including a stellar unemployment report released last Friday, alongside recent statements from Fed Chair Jerome Powell, have tempered expectations of early and drastic rate cuts previously anticipated by the market.
According to the CME Group’s FedWatch Tool, traders now only assign a 16.5% probability of a rate cut in March, a significant drop from the 68.1% probability seen at the beginning of the year. Additionally, projections for rate cuts by the end of 2024 have moderated to around 117 basis points, down from approximately 150 basis points anticipated in early January.
The dollar index, gauging the U.S. currency against six counterparts, dipped marginally by 0.06% to 104.39. It had reached 104.60 on Monday, its loftiest level since November 14.
Matthew Weller, global head of research at FOREX.com, described the prevailing narrative among FX traders as a return to the “U.S. economic exceptionalism trade,” reminiscent of the third quarter of last year. He noted a shift in focus towards whether the U.S. could witness either no economic slowdown or a re-acceleration this year, instead of a soft landing or recession.
Central to this perspective is the outlook for interest rates and their potential elevation, as higher yields typically support a currency’s strength.
George Saravelos, global head of forex research at Deutsche Bank, emphasized that the crucial debate lies not in the timing of Fed rate adjustments, but in the magnitude of easing relative to other global counterparts, indicating a potential downside risk for the dollar.
Elsewhere, the euro remained steady at $1.0742, with positive indicators from German industrial orders in December juxtaposed against reduced inflation expectations in the eurozone.
The Reserve Bank of Australia (RBA) maintained unchanged interest rates earlier in the day but hinted at possible future tightening. Consequently, the Australian dollar advanced by 0.31% to $0.6503, buoyed by optimism surrounding potential stability measures in the Chinese equity market.
Sterling appreciated to $1.2582, marking a 0.37% increase, although it lingered near Monday’s seven-week low. Despite encouraging UK employment figures, the pound’s resilience against rate cut expectations remains uncertain.
The Japanese yen demonstrated strength, trading at 148.250 per dollar, though not far from its recent two-month low of 148.90.
In Tuesday’s trading, the dollar saw a slight decline against major currencies, yet remained near its highest level in nearly three months, supported by robust economic data and a hawkish stance on interest rates from Federal Reserve officials.
Strong U.S. economic indicators, including a stellar unemployment report released last Friday, alongside recent statements from Fed Chair Jerome Powell, have tempered expectations of early and drastic rate cuts previously anticipated by the market.
According to the CME Group’s FedWatch Tool, traders now only assign a 16.5% probability of a rate cut in March, a significant drop from the 68.1% probability seen at the beginning of the year. Additionally, projections for rate cuts by the end of 2024 have moderated to around 117 basis points, down from approximately 150 basis points anticipated in early January.
The dollar index, gauging the U.S. currency against six counterparts, dipped marginally by 0.06% to 104.39. It had reached 104.60 on Monday, its loftiest level since November 14.
Matthew Weller, global head of research at FOREX.com, described the prevailing narrative among FX traders as a return to the “U.S. economic exceptionalism trade,” reminiscent of the third quarter of last year. He noted a shift in focus towards whether the U.S. could witness either no economic slowdown or a re-acceleration this year, instead of a soft landing or recession.
Central to this perspective is the outlook for interest rates and their potential elevation, as higher yields typically support a currency’s strength.
George Saravelos, global head of forex research at Deutsche Bank, emphasized that the crucial debate lies not in the timing of Fed rate adjustments, but in the magnitude of easing relative to other global counterparts, indicating a potential downside risk for the dollar.
Elsewhere, the euro remained steady at $1.0742, with positive indicators from German industrial orders in December juxtaposed against reduced inflation expectations in the eurozone.
The Reserve Bank of Australia (RBA) maintained unchanged interest rates earlier in the day but hinted at possible future tightening. Consequently, the Australian dollar advanced by 0.31% to $0.6503, buoyed by optimism surrounding potential stability measures in the Chinese equity market.
Sterling appreciated to $1.2582, marking a 0.37% increase, although it lingered near Monday’s seven-week low. Despite encouraging UK employment figures, the pound’s resilience against rate cut expectations remains uncertain.
The Japanese yen demonstrated strength, trading at 148.250 per dollar, though not far from its recent two-month low of 148.90.
In Tuesday’s trading, the dollar saw a slight decline against major currencies, yet remained near its highest level in nearly three months, supported by robust economic data and a hawkish stance on interest rates from Federal Reserve officials.
Strong U.S. economic indicators, including a stellar unemployment report released last Friday, alongside recent statements from Fed Chair Jerome Powell, have tempered expectations of early and drastic rate cuts previously anticipated by the market.
According to the CME Group’s FedWatch Tool, traders now only assign a 16.5% probability of a rate cut in March, a significant drop from the 68.1% probability seen at the beginning of the year. Additionally, projections for rate cuts by the end of 2024 have moderated to around 117 basis points, down from approximately 150 basis points anticipated in early January.
The dollar index, gauging the U.S. currency against six counterparts, dipped marginally by 0.06% to 104.39. It had reached 104.60 on Monday, its loftiest level since November 14.
Matthew Weller, global head of research at FOREX.com, described the prevailing narrative among FX traders as a return to the “U.S. economic exceptionalism trade,” reminiscent of the third quarter of last year. He noted a shift in focus towards whether the U.S. could witness either no economic slowdown or a re-acceleration this year, instead of a soft landing or recession.
Central to this perspective is the outlook for interest rates and their potential elevation, as higher yields typically support a currency’s strength.
George Saravelos, global head of forex research at Deutsche Bank, emphasized that the crucial debate lies not in the timing of Fed rate adjustments, but in the magnitude of easing relative to other global counterparts, indicating a potential downside risk for the dollar.
Elsewhere, the euro remained steady at $1.0742, with positive indicators from German industrial orders in December juxtaposed against reduced inflation expectations in the eurozone.
The Reserve Bank of Australia (RBA) maintained unchanged interest rates earlier in the day but hinted at possible future tightening. Consequently, the Australian dollar advanced by 0.31% to $0.6503, buoyed by optimism surrounding potential stability measures in the Chinese equity market.
Sterling appreciated to $1.2582, marking a 0.37% increase, although it lingered near Monday’s seven-week low. Despite encouraging UK employment figures, the pound’s resilience against rate cut expectations remains uncertain.
The Japanese yen demonstrated strength, trading at 148.250 per dollar, though not far from its recent two-month low of 148.90.
