US dollar update
US dollar Summary
Currently, the U.S. dollar index is moving to approximately 103.45, relinquishing some of its gains from the preceding session, as investors persisted in evaluating the prospects of Federal Reserve monetary policy in light of the latest economic updates. The US PCE price index exhibited a 3% increase in October compared to the previous year, indicating a deceleration from the 3.4% growth observed in the preceding three months. The initial assessment from the US Bureau of Economic Analysis on Wednesday revealed that the United States GDP grew at a yearly pace of 5.2% during the third quarter. This figure exceeded both the anticipated rate of 5.0% and the previous rate of 4.9%.
Notably, the U.S. dollar index recorded a 3% decline in November, marking its most substantial monthly decrease in a year, amid speculations that the central bank might commence rate cuts in the coming year. Investors are now eagerly anticipating insights from Fed Chair Jerome Powell’s statements today for further guidance. Traders will also be monitoring the release of the US ISM Manufacturing Purchasing Managers’ Index (PMI) later to gather new information.
Market Views & Opinions
On Friday, Goldman Sachs revised its projection, anticipating that the European Central Bank (ECB) will implement its initial interest rate reduction in the second quarter of 2024. This is a shift from their previous forecast, which had indicated a rate cut in the third quarter of the following year. This fact may affect the EURUSD currency pair bearishly if this scenario comes true.
ING in today’s article says “Our feeling is that investors’ positioning on the dollar had started to be stretched on the short side and that eurozone inflation was the trigger for a positioning adjustment but not a game-changer for the EUR/USD outlook. Short-term rate differentials unequivocally pointed to a weaker EUR/USD before the EZ inflation.”. ING concludes: “We expect some dollar consolidation in the coming days, with still upside risks as the greenback reconnects with its rate advantage.”
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