Precise Investors


Dollar on track for fifth straight weekly gain


The dollar had come under pressure after mixed U.S. data, with retail sales dropping more than expected in January

The dollar strengthened on Friday after two days of declines and was still on track for its fifth successive weekly gain as investors scaled back expectations for Fed rate cuts, while the yen was anchored near the key 150 per dollar level.

The dollar had come under pressure after mixed U.S. data, with retail sales dropping more than expected in January.

Investors await U.S. producer price data later in the session which could provide an update on key services components of the PCE index.

Some analysts said the dollar’s rebound could have run out of steam.

The dollar retracement “has been much greater than the retracement in U.S. yields and that might mean there are limits to further dollar strength over the near-term,” said Derek Halpenny, head of research, global markets EMEA at MUFG.

Still, in a backdrop of near recessionary conditions in Europe and Japan and a real estate crisis in China, we would continue to see upside risks for the dollar, Halpenny said.

The dollar index was 0.02% higher at 104.26 on Friday, having eased around 0.6% the two previous days. The index is on course to eke out a 0.18% gain for the week, its fifth in a row.

Remarks by Fed Chair Jerome Powell early this month and strong U.S. data have quashed expectations of early and deep rate cuts from the central bank.

Traders are now pricing in a rate cut in June, per the CME FedWatch tool, which had initially priced in March as the starting point of the Fed’s easing cycle.

The dollar correction this week is again the symptom of some investors’ impatience to join what remains a consensus view, in spite of recent data, that the U.S. will decline at some stage in 2024, said Francesco Pesole, forex strategist at ING.

This is also why we think EUR/USD is not too far from a supporting floor despite more dollar strength in the near term, Pesole added.

The euro was 0.05% higher to $1.0778, but set for a 0.55% decline on the week.

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