The dollar neared a two-week high against a basket of currencies as investors evaluated U.S. economic data showing a slowing labor market, while pricing in possible Federal Reserve interest rate cuts next year.
The dollar index rose 0.019% to 103.99, after strengthening 0.3% overnight. Data showed US job vacancies fell to their lowest level in more than 2-1/2 years in October, reflecting the impact of rising interest rates on labor demand.
Attention now turns to the November jobs report due Friday, providing clues about the strength of the economy before the Fed’s policy meeting.
There’s a 99.7% chance the Fed will hold position next week, but there’s a 56% chance a rate cut in March according to the CME.
ANZ analysis expects rate cuts from mid-2024, warning of need for strict direction from Chair Jerome Powell.
The dollar may weaken against G10 currencies in 2024 according to a Reuters survey of foreign exchange strategists.
Euro at $1.0795, sterling at $1.2601, yen at 147.12 to the dollar. The yuan weakened to $7.1657 per dollar after Moody’s downgraded China’s credit outlook to “negative.”
Bitcoin rose above $44,000, driven by optimism about US regulators’ approval of an exchange-traded spot bitcoin fund (ETF).
The US dollar has experienced a bullish reversal after breaking out of previous resistance and creating a new higher high. Even though it is still stuck in the 104.00 area, the US dollar has shown significant strength and with additional confirmation from the increasingly widening moving average crossover, this indicates the potential for DXY to still move higher. The US Dollar index will continue to be bullish as long as it does not create a new lower low below 103,200.
The market is currently in a very important stage of evaluation of the dynamics of the US economy and Federal Reserve policy. The slowdown in the labor market indicated by the latest data has increased speculation of a possible interest rate cut by the Fed in the coming year. Although these policy projections have influenced the dollar’s movements against other major currencies, there is doubt and caution regarding the long-term impact of these actions. While the euro and pound sterling show certain symptoms regarding the policies of their respective central banks, the decisions taken by the Federal Reserve have the potential to play a big role in the upcoming global currency trends. In this context, signals from the labor market and future Fed policy projections remain the center of attention for investors to anticipate the direction of future market movements.
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