The U.S. Dollar is trading in slightly weaker ranges across the board following 24 hours of crucial central bank action.
Overview
The Federal Reserve met yesterday and as expected by markets, sent a message of “hawkish” caution as it paused its run of cutting interest rates.
Chairman Jerome Powell explained that they will be on a wait-and-see approach as the economy has managed to be steadily growing. Earlier this morning, the release of Gross Domestic Product figures revealed a softer pace of growth than anticipated at 2.3% vs. 2.6%, but Personal Consumption surely impressed coming in at 4.2% vs. 3.2%.
The Bank of Canada also met yesterday and chose to cut by 25 basis points while dropping its rate guidance as the future is up in the air with potential for tariffs being levied on exports. As we came in, the European Central Bank met and also cut borrowing costs. The Euro has not dwindled however, as ECB President Chistine Lagarde exuded confidence about reaching the 2.0% inflation target and other items. Tomorrow will also give us plenty to chew as we see December Personal Income, Spending,, and Personal Consumption Expenditures tomorrow. Non-Farm Payrolls will be out Friday of next week, February 7th.
Review our Annual Currency Outlook for additional insights into FX Trading for 2025!
What to Watch This Week…
- Personal Consumption, PCE for December, Friday 8:30AM
- Monex USA Online is always open
MXN ⇓
The Mexican Peso is hanging on to its value while coping with some bad news on the GDP front. Q4 numbers showed that the Mexican economy experienced its first quarterly contraction since 2021. When looking into the details of the report, Agriculture was the most affected sector, shrinking by 8.9%. Traders are concerned after seeing GDP fall (-0.6%) when just a (-0.2%) loss was forecast. Year-on-Year growth fell from 1.6% to 0.6%. Anxiety over tariffs and government retrenchment are culprits of the pessimism brewing.
EUR ⇑
The Euro is holding steady despite the ECB’s decision to make a fourth consecutive cut to its benchmark interest rate, making it 125 basis points in total reduced since June. Lagarde stayed positive throughout her remarks about the ongoing disinflation, which shall bode well for consumer as well as producer confidence. While recognizing that there may be some headwinds economically, she spoke of seeing room for recovery in the Euro-zone. She was also happy to say there has been progress in the addition of new Euro members such as Bulgaria.
