He global dollar strengthened on Tuesday, after economic data from USA showed a generally stable labor market and a still robust service sector that suggested that the Federal Reserve (Fed) will likely slow the pace of its current cycle of cuts rates.
On Monday, the dollar fell in front of euro and the pound sterling after a report Washington Post that Trump’s advisers were exploring applying duty only to sectors considered critical to US national security. However, this Tuesday it rose to a high of almost six months against the yen and rose 0.2% to 157.875 yen. Earlier, it hit its highest level since July of 158.425 yen.
Meanwhile, the dollar indexwhich measures the currency against six rival currencies, rose 0.2% to 108.55, after falling as low as 107.74 overnight, its lowest level since December 30.
On the second day of the year, the index rose as high as 109.58 for the first time since November 2022, largely due to expectations that Trump’s promised fiscal stimulus, reduced regulation and higher tariffs would boost growth. of USA.
Solid data in the United States
The data showed that job vacancies employment in the United States rose unexpectedly in November, although hiring slowed during the month.
Vacancies, a measure of labor demand, increased by 259,000 to 8.098 million as of the last day of November, according to the Survey of Job Vacancies and Labor Turnover of the Bureau of Labor Statistics (JOLTS). Hiring, however, fell by 125,000 to 5.269 million in November.
The activity of the sector services U.S. inflation also accelerated in December, while a rise in an indicator of prices paid for inputs to a nearly two-year high indicated elevated inflation. The non-manufacturing purchasing managers’ index (PMI) of the Institute for Supply Management rose to 54.1 last month from 52.1 in November.
“The big surprise in the report was the jump in the prices paid index to an eleven-month high of 64.4 in December from 58.2; perhaps this reflects higher transportation costs or delivery charges in the holiday season,” he wrote Dave Rosenberg, founder and president of Rosenberg Research, in a note to clients.
“Suffice to say, the (ISM) report was enough to prompt markets to now expect a little more of a Fed rate cut for the year, and that has now been pushed back from June to July.”
Following the data, the US rate futures market has priced in a 95% chance of a pause in rate cuts this month and a 4.8% chance of easing, according to estimates from LSEG. Rate futures have also implied just 37 basis points of cuts in 2025, compared to the two cuts expected based on the Fed’s “dot plot,” or rate forecasts.
Investors are also assessing whether the president-elect’s actual policies donald trump on tariffs will be consistent with their hardline rhetoric.
Source: Ambito
