Home ForexArticles Dollar lower but set for weekly gain as hopes of early rate cut fade By Reuters

Dollar lower but set for weekly gain as hopes of early rate cut fade By Reuters

by SuperiorInvest

© Reuters. FILE PHOTO: U.S. one hundred dollar bills are seen in this illustration taken in Seoul February 7, 2011. REUTERS/Lee Jae-Won/File Photo

By Chuck Mikolajczak

NEW YORK (Reuters) – The U.S. dollar edged lower on Friday, pausing after five straight sessions of gains but still poised for a weekly rise as recent economic data and comments from Federal Reserve officials lowered expectations. of rapid cuts in interest rates.

The dollar strengthened early in the session after economic data showed the University of Michigan’s preliminary reading on the overall consumer confidence index was 78.8 this month, the highest reading since July 2021. compared to December’s 69.7 and surveyed economists’ estimate of 70.0. by Reuters.

The data comes on the heels of strong labor market and retail sales data earlier this week that indicated the economy remained strong.

Expectations for a March Fed cut of at least 25 basis points (bps) have fallen below 50% according to CME’s FedWatch tool, and traders now point to May as the likely month for a cut announcement of rates.

“The market refuses to give up, it is pushing its ideas into the future, but it hasn’t changed them,” said Joseph Trevisani, senior analyst at FXStreet in New York.

“The Fed is going to start lowering rates and the reason they’re going to start lowering rates is because the economy is going to weaken; this has been the mantra since the Fed started raising rates.”

The dollar, which tracks the greenback against a basket of six currencies, was down 0.08% at 103.26, on track to snap a five-session winning streak, but was up 0.8% for the week.

A steady stream of Fed officials, starting with Governor Christopher Waller on Tuesday, have rejected market expectations that the central bank will embark on a path of rapid interest rate cuts. Waller said the Federal Reserve should proceed “methodically and carefully” until it is clear that lower inflation will be sustained.

On Friday, Chicago Federal Reserve President Austan Goolsbee said weeks more of inflation data are needed before any decision to cut interest rates can be made.

Additionally, Federal Reserve Bank of San Francisco President Mary Daly said there is still a lot of work to do on inflation and that it is premature to think that rate cuts are around the corner.

The euro rose 0.16% to $1.0891 against the dollar, but is down about 0.5% on the week. On Friday, JPMorgan brought forward its expectations for the start of interest rate cuts by the European Central Bank to June from September, but said it remained “cautious” about inflation and wage growth trends.

The yen was stable against the dollar at 148.15. The Bank of Japan is scheduled to hold a monetary policy meeting next Monday and Tuesday and is likely to maintain its ultra-loose monetary policy. The dollar has risen more than 2% against the Japanese currency this week and is on track to record its third consecutive weekly gain.

Earlier data showed Japan’s core inflation rate slowed to 2.3% in the year to December, its lowest annual pace since June 2022, easing pressure on policymakers to take quick action.

Sterling was last trading at $1.27, down 0.06% on the day after weakening to $1.2662 following data showing UK retail sales fell in December to its biggest drop in three years.

In cryptocurrencies, bitcoin gained 2.04% to $41,900.00, but was headed for its second straight week of declines as investors took profits following the U.S. approval of exchange-traded funds. of spot bitcoin.

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