The Dollar Holds Last Week’s Gains, US Inflation Data in Focus
The Dollar’s Performance
The dollar retained most of its gains from the previous week, marking its most significant weekly rise against major currencies since July. This put an end to the declines witnessed in late 2023.
Market Movement
Following its 0.9% decline last week, the euro remained relatively unchanged at $1.0934. Meanwhile, the yen saw a slight strengthening at 144.5 per dollar, after experiencing a sharp decline from 140.8 per dollar at the beginning of the year.
Greenback Index
The dollar index, which tracks the performance of the greenback against six other currencies, stood at 102.53. It recorded a 1% gain last week, the most significant increase in six months, driven by global inflation slowdown and expectations of central bank rate cuts.
Market Analysis
The combination of higher equity prices and lower U.S. Treasury yields typically has an adverse effect on the dollar. However, market expert Simon Harvey noted a “bit of indigestion” in the markets since the start of the year, indicating a shift in sentiment.
Federal Reserve and Interest Rates
Market expectations regarding the possibility of a Federal Reserve interest rate cut in March have decreased to approximately 60%, down from about 90% at the end of December. The forthcoming U.S. inflation data on Thursday is anticipated to influence these expectations once again.
Global Economic Outlook
While U.S. employers hired more workers than expected in December and raised wages, indicating a resilient labor market, a separate survey revealed a considerable slowdown in the U.S. services sector. This paints a mixed picture of the world’s largest economy.
Global Market Sentiment
Amidst lower stock trading, sterling lost 0.24% to stand at $1.2688, while the Australian dollar fell 0.27% to $0.66955. Both currencies are sensitive to global market sentiment swings.
Swiss Franc Movement
The Swiss franc saw a slight softening at $0.8505 per dollar, reflecting the ongoing shifts in the global currency market.
