Dollar on track for its fifth successive weekly gain

by Jonathan Adams

The dollar index was 0.09% higher at 104.35 on Friday, having eased 0.4% on Thursday

The dollar was steady on Friday, on track for its fifth successive weekly gain, as investors take stock of economic data and firm expectations of the Fed cutting rates in June, while the yen traded at the key 150 per dollar level.

The dollar index, which measures the U.S. currency against six major peers, was 0.09% higher at 104.35 on Friday, having eased 0.4% on Thursday. The index is set to eke out a 0.2% gain for the week, its fifth in a row.

The dollar slid on Thursday after a mixed set of U.S. economic data, with retail sales dropping more than expected in January, pulled down by declines in receipts at auto dealerships and gasoline service stations.

A separate report showed initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 212,000 for the week ended February 10, further evidence of the U.S. labour market remaining tight.

We have seen how US activity is starting to show some softening and the US dollar momentum is taking a breather, said Christopher Wong, a currency strategist at OCBC in Singapore.

A softer read on PPI today should see US dollar ease lower. But overall market expectations on the timing of the first Fed cut and magnitude of the cut will continue to drive volatility in FX markets, Wong added.

A series of strong economic data has quashed any lingering expectations of an early and deep rate cuts from the Federal Reserve, with traders now pricing in an 80% probability of a rate cut in June, per the CME FedWatch tool.

Markets had initially priced in March as the starting point of the Fed’ easing cycle.

Traders now expect 94 bps of cuts this year, nearer to Fed’s own projection of 75 bps of easing and drastically lower than the 160 bps of cuts markets priced in at the end of 2023.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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