Dollar continues to weaken due to actions of Fed
2023.01.23 05:22
Dollar continues to weaken due to actions of Fed
By Ray Johnson
Budrigannews.com – Market participants bet that the Federal Reserve would reduce the size of its interest rate hikes for the second consecutive meeting in February, which would put the dollar at a nine-month low.
Before their policy meeting on February 1st, Fed officials are entering the “quiet period.” However, a report in The Wall Street Journal over the weekend raised expectations that the next move higher will only be 25 basis points, rather than the 50 basis points seen at the previous meeting.
Despite the continued strength of the labor market, a series of weak economic data last week, including notable declines in and, gave the impression that the U.S. economy slowed significantly at the end of the year. This is likely to be evident in the United States’ first reading on Thursday, where the QoQ rate of growth is anticipated to decrease from 3.2% in the third quarter to 2.6%.
The that tracks the dollar against a basket of advanced economy currencies was down 0.3% at 101.515 by 02:55 ET (07:55 GMT), extending its losses from the previous week. Since the Fed began raising interest rates in March, it had now lost nearly all of its gains.
In a note to clients, ING’s Chris Turner stated that “the data calendar in theory should keep the dollar on the soft side this week.” However, DXY has already advanced quite a bit, and we are unsure whether the market is prepared to increase short dollar positions ahead of the FOMC meeting next week.
In contrast, currencies whose central banks started raising rates later are outperforming because those institutions are still playing catch-up. After ECB officials repeatedly stated at the World Economic Forum that its next rate will be “significant,” or more than 25 basis points, the increased 0.5 percent to $1.0913. Despite this, the market continues to anticipate a first ECB rate cut by the end of the year.
Similarly, as the market tests the Bank of Japan’s resolve to defend its long-term bond yield target, the continues to strengthen.
On Monday, Finance Minister Shun’ichi Suzuki told parliament: As a result of the pandemic, Japan is having a hard time keeping up with demand. As a result, the severity of its public finances has increased to an unprecedented level. The government is ill-equipped to deal with an increasing debt service burden as a result of that situation.
With the start of the Lunar New Year holiday in China and a lack of market-moving data elsewhere, markets are expected to be mostly quiet on Monday.
After their respective nations began discussions on the establishment of a common currency, however, the and the are two currencies that are likely to be the focus of attention in the future. In comparison to the peso, the real has been a model of stability in recent years, despite its constant volatility.
