The US Dollar Weakens as Fed Rate Hikes Lose Steam
US Dollar Falls Against Euro
The US dollar reached an almost eight-week low against the euro on Monday, as confidence grew that the Federal Reserve has ceased hiking interest rates. Market participants eagerly await comments from multiple US central bank officials this week for further signals on rate policy.
Focus on Fed Chairman Jerome Powell
Fed Chairman Jerome Powell is scheduled to speak on Wednesday and Thursday, with market focus on whether he maintains the dovish tone he struck after the Fed’s two-day meeting last week. Analysts will also evaluate comments from other Fed officials for insights into their expectations regarding future rate increases.
Divergence Among Fed Members
While last week’s Fed statement was unanimous, experts anticipate a divergence of opinions between the doves and hawks on the Federal Open Market Committee (FOMC). Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, suggests that Powell’s view may not be widely shared.
Weaker US Jobs Growth
The US dollar faced additional pressure after weaker-than-expected jobs growth in October was released on Friday. This raised expectations of a slowing US economy, supporting the view that the Fed will maintain steady interest rates. The upcoming consumer price inflation data for October is expected to be the next major driver for markets.
Impact of CPI on Rate Hike Expectations
The market eagerly awaits the October consumer price inflation (CPI) data to determine whether the Fed needs to hike rates again. Bipan Rai suggests that a weak CPI print could shift the focus towards pricing in more easing for next year, while a strong print could lead to dip buying in the dollar against other currencies.
US Dollar Index and Euro Performance
The US dollar index was down 0.03% on the day at 105.02, reaching as low as 104.84, the weakest level since September 20. The euro gained 0.09% against the dollar, reaching $1.0739, the highest level since September 13.
Euro Zone Economic Weakness
Despite the euro’s recent gains, economic weakness in the euro zone relative to the US may limit further appreciation against the dollar. Dane Cekov, senior FX strategist at Nordea, suggests that the euro-dollar rally needs additional fuel to sustain its momentum.
Euro Zone Business Activity
A survey conducted in the euro zone revealed an acceleration in the downturn of business activity last month. The demand in the dominant services industry weakened further, raising concerns about a potential recession in the currency union.
Other Currency Movements
The dollar rose 0.25% against the Japanese yen to 149.74. Sterling gained 0.08% against the dollar, reaching $1.2391. The upcoming release of Britain’s GDP data for the third quarter is anticipated.
Currency Bid Prices at 10:00 AM
- Dollar index: 105.0200
- Euro/Dollar: $1.0739
- Dollar/Yen: 149.7350
- Euro/Yen: 160.80
- Dollar/Swiss: 0.8977
- Sterling/Dollar: $1.2391
- Dollar/Canadian: 1.3670
- Aussie/Dollar: $0.6498
- Euro/Swiss: 0.9641
- Euro/Sterling: 0.8667
- NZ: $0.5972
- Dollar/Norway: 11.0330
- Euro/Norway: 11.8505
- Dollar/Sweden: 10.8821
- Euro/Sweden: 11.6883
Please note that the information provided above is accurate as of 10:00 AM (1500 GMT).
