Abstract:The US Dollar saw a decline on Tuesday, continuing its downward trend after the extended weekend, fueled by increasing expectations that the Federal Reserve will postpone the initial rate cut even further.
Date: 2024.02.21 MHM European Time Analysis
The US Dollar saw a decline on Tuesday, continuing its downward trend after the extended weekend, fueled by increasing expectations that the Federal Reserve will postpone the initial rate cut even further. According to the CME Group FedWatch Tool, investors are now shifting their expectations towards a rate cut in June, with the likelihood of a 25 basis points cut in March dropping to 34.4% and the probability for June rising to 55.1%.
Stock markets showed a lackluster performance, with Wall Street remaining mostly in negative territory throughout the day.
Officials from the Bank of England (BoE), including Governor Andrew Bailey, appeared before Parliament's Treasury Committee to discuss inflation and the economic outlook. Governor Bailey remarked that the UK economy is operating at full capacity and is beginning to show clear signs of improvement. He mentioned that it's not necessary for inflation to reduce to 2% before considering rate cuts, and suggested that a rate reduction within the year is within the realm of possibility, though he did not commit to a specific timeline.
Statistics Canada released the January Consumer Price Index (CPI) figures, which indicated a year-over-year increase of 2.9% in January, a decrease from December's 3.4%.
The Federal Open Market Committee (FOMC) is set to publish the minutes from its latest meeting on Wednesday. This document is anticipated to shed light on the committee's rationale for ruling out a rate cut in March and will be scrutinized for any hints regarding the timing and likelihood of future rate reductions.
In the currency markets, the EUR/USD pair approached 1.0840, maintaining its position above the 1.0800 mark in early Wednesday trading. The GBP/USD pair was trading around 1.2620. The Canadian Dollar lagged behind the US Dollar, with the pair trading at approximately 1.3520. The AUD/USD pair enjoyed a fifth consecutive day of gains, trading around 0.6550. Meanwhile, both the CHF and JPY experienced slight losses against the US Dollar, and Gold prices surged, reaching over $2,030 per ounce.
Fed Governor Christopher Waller's recent comments have highlighted a cautious stance towards adjusting interest rates, marking a significant moment for the financial markets.
In the forex market, stability was the theme for the U.S. dollar index, holding firm at 104.30. Minor fluctuations were observed across major currency pairs: the Euro slightly weakened against the dollar, closing at 1.0827
In the latest market wrap focusing on the foreign exchange sector, the U.S. dollar index showed minimal movement, holding at 104.31.
On Tuesday, due to February's US durable goods orders growth exceeding expectations and an optimistic economic growth outlook for the first quarter in the US, the US dollar index initially fell but then rose, briefly touching below the 104 mark before recovering during the US trading session, closing up 0.07% at 104.29.