Traders are pricing in a 25 basis point cut by the Fed ahead of a more moderate monetary policy easing in 2025.
He global dollar remained firm in the early hours of Tuesday, in advance of what is projected as a new cut in the interest rates on the part of the Federal Reserve of the United States (Fed)the last of the year amid expectations for a easing of monetary policy more gradual by 2025.
He dollar index —which measures the performance of the greenback in relation to a basket of six other internationally relevant currencies— rose 0.2% to 106.99 units, approaching 5% gains for the year; while the pound It was one of the few currencies that rose against the dollar following good data regarding British wage growth and the possibility that rates in the United Kingdom fall more slowly than those of other countries.
For its part, the Fed will announce its interest rate decision on Wednesday and interest rate futures imply a 94% chance of a cut, even as service sector activity hit a three-year high, according to a survey of purchasing managers of S&P Global. In that sense, the indicator GDPNow of the Fed of atlanta stands at 3.3% for the fourth quarter, and the strength of the economy has been lifting yields and supporting the dollar, as traders estimate that the neutral level for rates may be higher than initially thought.
“We hope that the Fed show more caution about the future path of rate cuts. Therefore, 25 basis points is a fait accompli this week, but the key question is, obviously, what will happen next year,” the currency strategist of MUFG, Lee Hardman. “We believe there is a greater likelihood that we will see the Fed skip the next meeting in January to leave rates unchanged,” he added.
The elected president of the United States, Donald Trump, takes office in January, and has already promised a series of measures to impose duty to imports from countries such as China, Canada and Mexico, as well as the deportation of millions of undocumented immigrants, which could contribute to a sustained rebound in inflation and prevent the Federal Reserve cut rates deeper.
Central bank officials’ median long-term interest rate projection was 2.9% in September. Right now, market pricing means there is almost no chance that rates will be that low by December of next year and there is only a 30% chance that the fed funds rate will fall below 3.75%. by the end of 2025.
The euro, for its part, is headed for a fall of almost 5% against the dollar this year and fell 0.2% to $1.04823 on Tuesday.
The dollar opened the week lower in Uruguay
In Uruguay, Meanwhile, it fell 0.44% compared to Friday and closed at 44.361 pesos in the interbank price of the Central Bank (BCU), continuing to operate with ups and downs within the range of 44 pesos, after reaching a maximum since January 20, 2022 the previous day.
The US currency now accumulates a monthly appreciation of 2.79% in December and an annual appreciation of 13.68%, since its price is 5.34 pesos above that registered after the close of the last exchange day of the last year.
Source: Ambito
