As markets broke down cautious remarks from Federal Reserve Chair Jerome Powell and awaited a crucial employment report that may impact the outlook for U.S. interest rates, the dollar began the week on a shaky note on Monday.
After hitting the $40,000 mark for the first time in more than a year, Bitcoin took center stage in the Asian morning. Powell stated on Friday that it was evident that the economy was slowing down as anticipated due to US monetary policy, with the benchmark overnight interest rate now “well into restrictive territory.”
Even though Powell reaffirmed that the Fed is ready to tighten policy even more if necessary, traders were certain that the cycle of rate hikes was over. According to the CME’s FedWatch tool, markets were pricing in a 60% chance of a rate cut by the March meeting, up from 21% just over a week ago. The U.S. dollar index, which measures the value of the dollar against six significant rivals, was last trading near Friday’s close of 103.28.
According to Kyle Rodda, senior financial market analyst at Capital.com, non-farm payrolls are the “most important risk event” this week because U.S. data is still the “primary driver” of the G10 currencies. On Friday, the much anticipated November jobs report is expected to be made public. “What we are seeing is the pricing out of U.S. economic exceptionalism, compounded by an unwinding of stretched long positioning in the U.S. dollar.”
According to Rodda, this implies that dollar pairs may continue to rise in response to U.S. economic data. The dollar was trading at $146.58 against the yen, down from its session low of 146.24, which was reached on September 11. The near 33-year low of 151.92 per dollar, which was touched in mid-November, has been abandoned by the yen. The kiwi increased marginally to as high as $0.6222, its highest level since late July, while the Australian dollar reached a new four-month high of $0.669 against the US dollar.
The most recent price of sterling was around $1.2682, a decrease from last week’s three-month high of $1.2733 against the US dollar. Several speeches from European Central Bank officials this week could also influence currency markets. These speeches come ahead of an array of regional economic data, including the euro bloc’s revised third-quarter gross domestic product (GDP) data on Thursday.
Data released last week revealed that inflation in the eurozone dropped to 2.4% in November, adding credence to predictions that the ECB will lower interest rates sooner than the bank has been recommending.
Following last week’s inflation data, which saw the euro drop to as low as $1.0829, the euro was essentially flat on Monday at $1.0874. Later on Monday, President Christine Lagarde is scheduled to deliver a speech.
According to Carol Kong, a currency strategist at Commonwealth Bank of Australia, “Lagarde will certainly welcome last week’s Eurozone CPI report but I doubt she will entertain the idea of ECB rate cuts yet,” noting that the labor market in the eurozone is still tight. In other cryptocurrency news, there are bets that U.S. regulators will soon approve stock-market traded bitcoin funds, which would explain why bitcoin hit the $40,000 mark for the first time in nearly a year and a half.
- Published By Team Genuine Reporter