USD Flat After Mixed US Data, Set for Best Weekly Gain Since July
Resilient Dollar Despite Mixed Data
The dollar remained largely unchanged on Friday following a surge driven by conflicting data, signaling both weaknesses and resilience in the world’s largest economy. The USD was flat at 102.43 in afternoon trading, after peaking at 103.10 in response to a robust U.S. jobs report, marking its highest level since mid-December.
Best Weekly Gain Since Mid-July
Despite the mixed data, the dollar is on track for its best weekly performance since mid-July, with a solid 1.1% gain. The greenback initially rallied after December’s job report exceeded expectations, but a subsequent drop was observed as the ISM reported a significant slump in the U.S. services sector.
Market Positioning and Future Rate Expectations
Market strategist, Marc Chandler, noted the lack of conviction within the market, foreseeing a period of broad consolidation in the coming days. U.S. rate futures have projected approximately five rate cuts of 25 basis points each for 2024, reflecting a shift from earlier expectations of six rate declines.
Impact on Federal Reserve’s Interest Rate Policy
Analysts believe that the jobs report suggests the Federal Reserve is unlikely to rush into any interest rate cuts in the near future. The futures market is expected to align more closely with the Fed’s forecast of approximately 75 bps of rate cuts in 2024. The market’s reaction to the latest jobs report suggests a cautious stance, with a 50/50 probability for rate cuts at the upcoming March meeting.
Performance Against Other Currencies
The dollar saw a slight increase against the yen, reaching 144.655, and a three-week peak at 145.98 yen post-payrolls data. Conversely, the euro experienced a dip against the dollar to $1.09405, marking its largest weekly drop since early December.
Overall, the dollar’s movement over the week reflected a blend of positive and negative economic indicators, prompting cautious market sentiment and a mixed outlook for future rate policy.
