On December 18, the US Dollar (USD) experienced fluctuating demand, largely influenced by a downturn in Wall Street and remarks from Federal Reserve (Fed) Governor Christopher Waller. Waller’s comments indicated that the Fed is not hastily moving towards interest rate cuts, citing the softness of the job market and subpar payrolls growth. Nevertheless, he reassured that inflation remains “well anchored,” contributing to mixed trading behavior of the US Dollar Index (DXY), which retreated from a weekly high around 98.60.
In examining the performance of the US Dollar this week against other major currencies, it emerged as the weakest against the Japanese Yen, with the following percentage changes recorded:
- EUR: -0.11%
- GBP: -0.10%
- JPY: +0.12%
- CAD: +0.58%
- AUD: +0.37%
- NZD: -0.19%
- CHF: +0.19%
These values indicate a varied landscape for the Greenback, with certain currencies showing resilience against it.
The Sterling Pound experienced a dip against the USD following the release of UK inflation data. The year-over-year Consumer Price Index (CPI) rose by 3.2% in November, a decrease from 3.6% in October, but it still exceeds the Bank of England’s (BoE) target of 2%. The GBP/USD pair saw most of its intraday losses recovered after hitting a weekly low at 1.3311, now hovering around the 1.3400 mark. With the BoE set to announce its monetary policy decision soon, market expectations lean towards a 25 basis points cut, reducing the interest rate to 3.75%.
Meanwhile, the EUR/USD pair maintained stability, trading above 1.1700 and settling comfortably around 1.1750. The European Union’s revision of the November Harmonized Index of Consumer Prices (HICP) from an initial estimate of 2.2% down to 2.1% year-on-year preceded the European Central Bank’s (ECB) upcoming monetary policy announcement. Analysts expect the ECB to keep interest rates unchanged while reiterating its positive economic stance. Attention will also center on new economic projections for the next two years.
Upcoming US data releases, particularly the November CPI, are eagerly awaited, with a forecasted annual increase to 3.1%, up from 3%. These statistics are anticipated to significantly impact future Fed decisions, as traders remain attentive to indicators of economic health.
Commodity-linked currencies faced challenges against the USD, primarily with the Australian Dollar (AUD) and Canadian Dollar (CAD) witnessing some declines. The Japanese Yen (JPY) also saw reductions in value against the Greenback, while the Swiss Franc (CHF) achieved modest gains.
In the commodities sector, gold maintained its positive outlook, trading above $4,330, though it struggled to extend its recent weekly gains as markets assessed the unfolding economic landscape.
As central banks around the globe prepare to release crucial monetary policy updates and economic forecasts, market participants remain on high alert for any indicators that may suggest shifts in fiscal strategies.
