He dollar US is approaching its lowest levels in three months this Thursday, heading for its biggest monthly decline in a year. This decline comes at a time when investors are intensifying their bets that the Federal Reserve has ended with the increases in interest rates ahead of the release of a crucial inflation report.
The index of dollarwhich evaluates the currency against six competing currenciesis falling 0.058% to 102.74, standing near 102.46, its lowest level since August 10, reached last Wednesday.
November is witnessing a drop in 3.7% in the index due to growing expectations that the Federal Reserve will decrease the interest rates in the first half of 2024.
Despite the dollar is recovering part of its losses this day, after macroeconomic data that showed faster growth of the US economy in the third quarter than initially reported, attention remains on yields in the United States and on the monetary policy decisions of the Committee Federal Open Market of the Fed.
Investors are eagerly awaiting Fed Chair Jerome Powell’s remarks this Friday, especially after Fed Governor Christopher Waller hinted at a possible rate cut in the coming months.
Dollar: the data analyzed by the market
But before that key moment, eyes are focusing on the price index in today’s personal consumption expenditure (PCE) report, the Federal Reserve’s preferred inflation measure.
The PCE data is offering insight into whether the downward trend in inflation continues or not, according to Christopher Wong, currency strategist at OCBC.
Financial conditions in the United States are experiencing their greatest flexibility since early September, easing by 100 basis points in one month, according to Goldman Sachs. The bank’s global and emerging market indices are seeing a slight rise this week, but financial conditions remain looser by around 100 basis points compared to a month ago.
Interest rate futures markets in the United States They are now forecasting more than 100 basis points of cuts next year, starting in Mayand the two-year Treasury yield is at its lowest level since July, falling nearly 40 basis points this week alone.
In Asian markets, bond yields 10 years is remaining at 4.288% at the time of writing this article. This dollar weakness is boosting most currencies in Asia and regionally.
Two currencies are standing out at opposite ends of the carry trade strategy: the New Zealand dollar and the Japanese yen. The “kiwi” is receiving an additional boost after the central bank’s more aggressive stance, maintaining its official interest rate at 5.50%, with the possibility of increasing it if inflation does not moderate.
On the other hand, expectations that the Bank of Japan will soon end its negative rate policy are strengthening the yen, easing pressure on the central bank to intervene directly in the currency market.
In summary, the dollar continues to show signs of weakness while global markets and regional currencies are influenced by expectations of monetary policies and the evolution of inflation, generating movements in financial indices and currencies around the world.
Source: Ambito
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