USD rises amid expectations for slower rate cuts
Daily Currency Update
The US Dollar Index (DXY) pushed towards 103.6 today as recent economic data further confirmed expectations that the Federal Reserve won’t cut interests rates as quickly as initially anticipated. Data released today revealed that initial jobless claims dropped by 16,000 to 187,000, the lowest since September of last year. In addition, US Building Permits also came in higher at 1.9% to the seasonally adjusted annual rate of 1.495 million in December, an increase over the previous month’s print of 1.467 million and beating the market’s expectation of 1.48 million. Markets are currently assigning a 55% probability of 25 basis point (bps) rate cut by the Fed in March.Key Movers
The euro traded near 1.0860 against the USD, as it maintained proximity to its lows from mid-December. European Central Bank (ECB) President Christine Lagarde hinted at a possible rate cut in the summer but emphasized the need for caution due to persisting uncertainties. The chance of an immediate rate cut was tempered by other ECB officials earlier this week who took a more hawkish stance.The pound traded within the 1.2659 mark as its fluctuated between persistently elevated inflation figures for December and a risk-off market sentiment. The unexpected rise in the UK Inflation rate led investors to drop their expectations of an interest rate cut in May. Four rate cuts of 25 bps are being anticipated by traders with a 50% probability of a fifth cut. Retail sales data is set to be released tomorrow and will provide further insights into the overall economic performance of the UK.
USD/CAD traded around 1.3510 as the Canadian dollar attempted to regain some ground against the US Dollar after a 5-day losing streak. The Loonie benefited from a modest recovery in oil prices and an enhanced risk sentiment which have counteracted the influence of robust US data. Retail sales figures, set to be released on Friday, will provide further insights into the overall status of the Canadian economy. West Texas Intermediate (WTI) crude oil futures were higher for the second consecutive session, surpassing 73 per barrel. Recent geo-political tensions in the middle east have been a driving force for the increase in oil prices.
Expected Ranges
- EUR/USD: 1.0849 - 1.0904 ▼
- GBP/USD: 1.2652 - 1.698 ▲
- AUD/USD: 0.6531 - 0.6574 ▼
- USD/CAD: 1.3484 - 1.3534 ▲