He global dollar fell slightly and is headed for an annual gain of almost 7%, while the yen is heading for a fourth consecutive year of losses, as traders anticipated that strong US growth would cause the Federal Reserve (Fed) be cautious about cutting rates well into 2025.
He dollar index —which measures the performance of the greenback relative to a basket of six other internationally relevant currencies— fell 0.06%, with a weekly gain of 0.2%, and showed a gain of 6.6% in 2024.
He dollar/yen fell 0.06%, but near Tuesday’s five-and-a-half-month high. The greenback also showed a 5.4% gain this month against the beleaguered yen and a near 12% advance by 2024. The euro held steady, not far off November’s two-year low and showing a 5.6% year-to-date loss.
The president of the Federal Reserve, Jerome Powellsaid earlier this month that U.S. central bank officials are “going to be cautious about further cuts” after an expected quarter-point rate cut. The US economy also faces the impact of the president-elect Donald Trump, who has proposed deregulation, tax cuts, tariff hikes and stricter immigration policies that economists consider both pro-growth and inflationary.
Traders are pricing in 37 basis points of US rate cuts in 2025, with no reduction fully priced in in money markets until June, at which point the European Central Bank (ECB) has cut its deposit rate by a full percentage point to 2% as the euro zone economy slows.
Meanwhile, traders anticipate that the Bank of Japan (BoJ) will maintain its loose monetary policy.
The markets are approaching the end of the year
He MSCI index of global actions rose 0.1 points on Friday and remained 1.5% higher on the week, while the S&P 500 of Wall Street is headed for a weekly gain of 1.8%. Futures trading indicated that the S&P would begin the New York session down about 0.4%.
He MSCI Asia-Pacific equity index outside Japan was heading for a weekly rise of 1.5% and the Nikkei of Tokyo closed the week with 2% more.
European stocks lagged behind, with the Stoxx 600 stable on Friday and 0.3% higher this week.
Analysts said stock markets could change direction as investors return from vacation and reassess the risks of high U.S. inflation under the Trump administration for highly valued Wall Street stocks. “There is some potential left for this bull market, but it is limited,” the chief strategist at Pictet Asset Management, Luca Paolini. “Inauguration Day is a potential turning point and all the (prospective) good news will be in the price by then,” he added.
In the debt marketsexpectations of higher rates in the United States led the performance of the 10-year Treasury bondwhich rises when the price of the fixed income security falls, to its highest level since early May on Friday, at 4.611%.
The two-year Treasury yield, which tracks interest rate forecasts, traded around 4.34%. US debt trends also pushed up euro zone yields, with the German benchmark 10-year bond yield rising 7 basis points (bps) to 2.392% on Friday.
Source: Ambito
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