The U.S. Dollar is trading at its weakest levels overall since the month of August following central bank announcements, marking truly the end of monetary tightening in the U.S.
Overview
The Federal Reserve met, and Chairman Jerome Powell indicated that there are indeed some colleagues who feel they should try reaching their 2.0% inflation target with a series of interest-rate hikes. Nevertheless, the dot plot yesterday showed a tentative plan for cutting instead, by 75 basis points, but there is no guarantee this is coming. FOMC officials seem mostly satisfied with the work they have done thus far and now will digest the 2024 Q1 effects while letting the economy ride.
Per markets, this all comes off as a dovish turn for the Fed’s stance, and the Buck kept sliding following central bank divergence with other monetary authorities. After the European Central Bank and Bank of England announcements on their plans, it is clear that on the other side of the Atlantic, the concern over elevated prices is too much to promise no more increments, thus the rally across the board that is sinking the dollar. We close out the week tomorrow with some Manufacturing Purchasing Managers Index data from both the U.S. as well as the Eurozone.
What to Watch Today…
- Manufacturing PMIs Friday 8:30 AM U.S. & Euro-zone
- Monex USA Online is always open.
EUR ⇑
The Euro is going back to its November vibes, trading in green territory to get back to its strongest point since August. The ECB explained that they are worried about prices continuing to cloud consumption while hoping to quicken the pace at which they are leaving pandemic-era stimulus behind. The tone and plan are complete opposites to the presentation by the Fed and show that regardless of very underwhelming economic figures in Europe, there is positivity in outlook and confidence that the tighter policy mandate is the right path going forward.
GBP ⇑
Sterling also reached its best levels since mid-summer after the BOE continued its message of keeping interest rates higher for longer. BOE Governor Andrew Bailey was indeed pushing back on increased market expectations of an interest-rate cut coming. At the moment, the odds of a cut by the end of Q1 stood at 79.0%. Many economists fear that England has cut itself off from solid trading for years and that economic shocks have only made the pain worse, with little economic progress to show since Brexit. There will be anxiety next year over pressures to have a general election and have a change of the guard.
