Jan 9, 2024: The dollar’s ascent was halted on Tuesday due to declining U.S. consumer inflation forecasts, affirming traders’ expectations for multiple Federal Reserve rate reductions this year.
Meanwhile, Bitcoin maintained its position close to its highest level since April 2022, driven by mounting speculation regarding the impending approval of spot Bitcoin exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC).
The latest Survey of Consumer Expectations from the New York Fed, released on Monday, indicated a notable drop in U.S. consumers’ short-term inflation forecasts, reaching their lowest point in nearly three years in December.
An upcoming U.S. inflation report later this week is anticipated to offer clearer insights into the Fed’s potential room for interest rate adjustments this year.
Kyle Rodda, a senior financial market analyst at Capital.com, highlighted, “The significant narrative… stemmed from the data on future inflation expectations. Although the labor market remains tight, these disinflationary signals in the United States increase the likelihood of the Fed’s ability to implement rate cuts relatively soon.”
Market futures indicate an estimated 135 basis points in Fed easing for the year, with a probability of approximately 60% for rate cuts to commence in March.
Kamal Sharma, senior G10 FX strategist at Bank of America, expressed, “The market is still gauging the direction and timing of the initial U.S. rate reduction.” Sharma anticipates the Fed to commence rate cuts during the March meeting.