With trading subdued because of holidays this week and markets in the UK closed Friday, investors’ attention has largely turned to major economic reports out of the US expected in the first few weeks of January. The December jobs report and consumer inflation readings, in particular, will help chart the Fed’s next steps after officials reduced borrowing costs this month for the third straight meeting to support growth.
The Bloomberg Dollar Spot Index edged lower on Friday and is down about 0.8% this week. It has declined around 8% this year, which would be its steepest annual drop since 2017. The measure is also set for its lowest close since September. Risk-sensitive currencies like the Australian dollar and Norway’s krone led gains against the greenback on the week among major peers.
“Liquidity was thin this week, and that didn’t help the dollar, which was already in a relatively weak position,” said Andrew Hazlett, a foreign-exchange trader at Monex USA. “Looking ahead, our focus is going to be on inflation numbers as guidance for the Fed’s next cut.”
Dollar Set for Weakest Close Since September
Bloomberg’s greenback gauge is also down some 0.9% on week
The greenback’s decline has coincided with gains in Treasuries, with US 10-year yields falling about three basis points this week to 4.12%, within the range of the past couple of weeks. Traders see about a 90% probability that the Fed will stay put next month. But they’re betting on another quarter-point cut by mid-year, and one more several months later.
US unemployment data released this month showed the jobless rate rising to its highest since 2021, while data on consumer inflation showed lower-than-expected readings.
Traders have bolstered expectations for a weaker US currency for five days in a row, with a key options gauge now at the most bearish on the greenback in more than three months.
