U.S. Dollar Eases Ahead of Inflation Report
Market Trends
The dollar eased to a 3-day low against a basket of currencies as traders awaited Friday’s U.S. inflation report for clues to future Fed policy. Wall Street’s main indexes opened higher on Thursday, recovering from the previous session’s sell-off as investors hoped for easing borrowing costs next year.
Economic Data
The number of Americans filing new claims for unemployment benefits rose marginally last week, indicating underlying strength in the economy. However, gross domestic product increased at a 4.9% annualized rate last quarter, revised down from the previously reported 5.2% pace.
Fed Policy and Inflation
The Federal Reserve held interest rates steady last week and signaled that lower borrowing costs are coming in 2024. Attention now turns to Friday’s reading on the U.S. core personal consumption expenditure (PCE) index, with markets anticipating a slowdown in inflation and early and aggressive Fed action.
Global Impact
The U.S. dollar is the weakest major currency amidst mixed economic data, with traders fearing a potential March interest rate cut from the Federal Reserve. Sterling was up 0.21% at $1.2666 against the dollar on Thursday, while the dollar index, which tracks the U.S. currency against six peers, was last down 0.439% at 101.96.
Market Analysis
Some analysts believe month-end rebalancing in thin trade could weigh on the dollar in the near term, while others point to the yen’s 8% lower status against the dollar for the year. The risk-sensitive Australian and New Zealand dollars traded higher on the day, with Bitcoin 0.17% higher at $43,741, just below last week’s 20-month high of $44,729.
