The U.S. Dollar Slips as Traders Bet on Rate Cuts
The U.S. dollar weakened against major currencies as traders sold off the currency in anticipation of rate cuts by the U.S. Federal Reserve. The yen, however, remained strong after the Bank of Japan did not signal an end to its ultra-loose monetary policy.
Fed Officials Push Back on Rate Cut Expectations
Following the Federal Open Market Committee meeting, where three rate cuts were discussed for 2024, Fed officials have been pushing back against expectations of imminent rate cuts. Atlanta Federal Reserve President Raphael Bostic expects two rate cuts in the second half of the year but stated there is no urgency at present. Richmond Fed President Thomas Barkin added that rate cuts will depend on economic performance.
Dollar’s Movement Depends on Economic Data
The movement of the dollar will depend on economic data supporting the expected rate cuts. The Fed’s preferred measure of underlying inflation, the core PCE price index, is due this week and may provide clarity on whether inflation has slowed enough to warrant easing policy next year.
Yen Weakens on Lack of Hawkishness
The yen weakened against the dollar after the Bank of Japan made no indications of ending negative interest rates. The lack of hawkishness suggests a policy shift is unlikely before April next year.
Euro Holds Firm, Sterling Makes Gains
The euro remained steady at $1.0973, while sterling saw gains against a weaker dollar.
Bitcoin Sees Modest Increase
In the world of cryptocurrencies, bitcoin experienced a slight increase of 0.44% and was valued at $42,446.00.
Hot Take: The U.S. Dollar Weakened as Traders Anticipate Rate Cuts
The U.S. dollar slipped against major currencies as traders bet on rate cuts by the Federal Reserve. While Fed officials have pushed back on expectations, market participants are pricing in a 67.5% chance of the first rate cut happening at the Fed’s March meeting. The movement of the dollar will depend on economic data supporting the anticipated rate cuts. Meanwhile, the yen weakened on the lack of hawkishness from the Bank of Japan, and other currencies like the euro and sterling saw steady or improved performance against a weaker dollar. In the world of cryptocurrencies, bitcoin experienced a modest increase.
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