USD makes modest gains but remains on the backfoot
Daily Currency Update
On the first trading day of the new year, the US dollar exhibited a modest gain, with the focus shifting towards upcoming economic data set to unveil insights into the Federal Reserve's prospective actions.Having experienced a 2% decline in 2023, terminating a two-year streak of gains, the dollar index gauging the U.S currency against six counterparts currently stands at 101.44, reflecting a marginal increase of 0.059%. Investors weighed the possibility of the Federal Reserve implementing rate cuts within the year, with markets now pricing in a 86% chance of a cut as early as March.
Key Movers
Despite achieving its most successful performance against the dollar since 2017, the prospect of a recurrence seems improbable for the British pound due to a deteriorating economy and lingering uncertainty surrounding elections.The reasons behind the resurgence in investor interest in the UK currency become apparent when considering its rebound from a record low just 16 months ago. The economy outperformed expectations, persistent inflation compelled the Bank of England to delay monetary easing compared to its counterparts, and the dollar's allure diminished amid anticipations of an early U.S. rate cut.
In 2023, the pound experienced an almost 6% increase against the dollar, securing its position as the second-best performing major currency, trailing only the Swiss franc.
Expected Ranges
- GBP/USD: 1.2715 - 1.2785 ▲
- GBP/EUR: 1.1525 - 1.1595 ▲
- EUR/USD: 1.1005 - 1.1075 ▲