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The Dollar Ends a Volatile Week on a Strong Note

The Dollar Ends a Volatile Week on a Strong Note, Supported by Trump’s Tariff Plans:
The U.S. dollar experienced a highly volatile week but ended
with strong performance amid renewed global trade tensions.
This surge came after President Donald Trump announced new plans
to impose tariffs on countries restricting U.S. exports, reigniting market uncertainty.

In this report, we will examine the key factors that drove the dollar’s rise,
how global currencies and emerging markets have been affected by trade war developments,
and investor trends in response to these updates.

 

Contents

Dollar Performance

Dollar vs. Major Currencies

A New Reality in the Trade War

Increased Demand for the Dollar

Conclusion

 

Dollar Performance

The U.S. dollar ended a volatile week with strong performance,
benefiting from renewed uncertainty over President Donald Trump’s intentions to impose new tariffs.
The rise followed Trump’s remarks,
in which he indicated his plans to announce similar tariffs
on countries that impose restrictions on U.S. exports without specifying which countries would be targeted.

The Bloomberg Dollar Spot Index rose by 0.4%,
while global currencies weakened against the U.S. dollar.
Although the dollar faced pressure after Canada and Mexico announced
a one-month delay in imposing tariffs,
it managed to recover some of its earlier losses.

According to Brendan McKenna, a strategist at Wells Fargo in New York:
 “We are in a period where tariffs-related statements and headlines will directly impact the markets.”

 

Dollar vs. Major Currencies

Most major currencies from the Group of Ten (G10) weakened against the dollar.
The Japanese yen lost its gains during the session after Trump stated
that imposing tariffs on Japan was still an option.
Meanwhile, the euro and Swiss franc led the decline among global currencies.

Eastern European currencies and the Brazilian real were among the biggest losers in emerging markets.
At the same time, the stock index of emerging markets is
primarily focused on Asia.
It trimmed its gains following news of potential tariffs

but remained on track to post its fourth consecutive weekly increase.

Jordan Rochester, head of fixed income and currency strategy at Mizuho Bank, commented:
 “The term ‘similarly’ carries a specific implication, but we know that Trump uses terms flexibly.
Anyone who thought tariffs wouldn’t be imposed until
Canada and Mexico’s grace period ended must now take short-term hedging measures.”

 

A New Reality in the Trade War

Traders faced a turbulent start to the week after the Trump
administration announced a 25% tariff on goods from Canada and Mexico,
only to retract the decision after both countries announced a one-month delay.
Meanwhile, the 10% tariffs on Chinese goods remain unchanged.

 

Increased Demand for the Dollar

Despite the volatility, demand for the U.S. dollar remains strong.
The Bloomberg Dollar Spot Index is trading 0.5% lower for the week but remains close to its highest since 2022.

The latest data from the Commodity Futures Trading Commission (CFTC)
speculators hold long positions worth up to $33.7 billion, nearing the dollar’s peak in 2019.

Win Thin, Head of Global Market Strategy at Brown Brothers Harriman & Co., stated:
 “Trump is delivering on all his promises, which will continue to support the strength of the U.S. dollar moving forward.”

 

Conclusion

The dollar ended a volatile week with strong performance,
driven by Donald Trump’s comments on imposing new tariffs.
While markets remain uncertain,
investors continue to turn to the greenback as a haven,
reinforcing the dollar’s strength despite market fluctuations.

 

The Dollar Ends a Volatile Week on a Strong Note

The effect of the US Federal Reserve’s tightening speech

The effect of the US Federal Reserve’s tightening speech on gold and the dollar:
Today, the markets are awaiting the monetary policy meeting in the United States of America,

and the bank will likely keep the interest rate as it is without any change, around 5.5%.
Will the decision affect gold and the dollar and how?

 

Topics

 

Australian consumer prices

CB Consumer Confidence

The US Federal Reserve’s tightening speech

 

 

 

Australian consumer prices respond to monetary tightening programme

 

During Wednesday’s trading, Australian consumer prices presented data that the Bank of Australia will see as a good range.
The Bank of Australia, which is following a monetary tightening program
and raising interest rates to bring back Australian inflation, targets the bank around 2.0%.

Annual consumer prices: presented a negative reading and declined by around 3.4%.
It is worth noting that expectations were indicating 3.7%,
while the decline came from very high levels around 4.3%.

When the quarterly core consumer prices presented a contradiction to expectations that indicated a presentation of 0.8%
and achieved a lower negative reading than the reading around 1.2%,
it declined and settled around 0.6%, which is a very negative reading.

Australian quarterly core consumer prices also provided a negative reading, settling around 0.8%.
It is worth noting that the reading that preceded them was around 1.2%, contradicting expectations that were indicating 0.9%.

All of this puts the Bank of Australia in a good position,
as Australian inflation has already responded by declining through the adopted tightening file,
which may push the bank to reduce the Australian interest rate early during the current year.

 

What did American CB Consumer Confidence provide to the markets?

 

During yesterday’s trading, we witnessed data issued by the United States of America,
which presented the American Consumer Confidence Index, which was conducted on approximately 5,000 households,
asking participants to express their opinions on the current state of the economy and what are the upcoming events that they expect.

Consumer confidence presented a positive reading, contrary to expectations that were indicating 114.2, to settle around 114.8,
thus contradicting expectations and adding more positivity, as the previous reading was around 108.0.

A succession of positive data from the United States supports the positivity of the index’s movements from the beginning of the year until now,
as it is now trading around 103.20, awaiting the most important data and monetary policy report issued by the US Federal Reserve for January.

 

 

 

The US Federal Reserve and how both gold and the dollar will be affected in light of a tightening speech

The US Federal Reserve has taken the year 2023 to fight high US inflation, bringing interest rates to the highest levels of around 5.5%.
It is noteworthy that US Federal Reserve Governor Jerome Powell gave, in the last meeting of 2023 in December,
an indication of the possibility of the US Central Bank’s victory in fighting high inflation, while hinting at the start of reduction during the current year of 2024,

Today, the markets are awaiting the monetary policy meeting in the United States of America,

and the bank will likely keep the interest rate as it is without any change, around 5.5%.

We are awaiting how the Federal Reserve viewed the data issued during the last period regarding the rise in annual American consumer prices to 3.4%,

and whether the positive labor market is putting pressure on it. On inflation again, pushing it higher,

we are all waiting to find out when it will start and how much the US Federal Reserve will reduce during the current year.

 

The effect of the US Federal Reserve’s tightening speech

The Dollar starts 2024 with its best day since March

The Dollar starts 2024 with its best day since March: The Bloomberg Dollar Spot Index increased 0.7%, the highest since March 2023 while the U.S.
stock and treasury bonds decreased. Investors have reduced their predictions about how much the Federal Reserve will cut interest rates in 2024.
It was the dollar’s strongest daily rise since last March’s regional banking crisis.


Topics

Good outset for the Dollar

Federal Reserve Bank report

The dominance of the dollar


Good outset for the dollar

Such a good start to 2024 comes after last year’s volatility when the dollar’s performance was largely driven
by speculation surrounding when major central banks would cut key interest rates – and by how much.
The currency fell 2.7% last year, the worst annual performance since the Covid-19 pandemic swept the world in 2020.

 

Federal Reserve Bank report

“The Fed’s expectations are still there, we just have to wait and see where things go,” said Brad Bechtel, global head of foreign exchange at Jefferies.

Traders are awaiting the report of the Federal Reserve meeting held last month, which is expected to be released today.
The report will include details of the meeting, in which the participants announced the end of the severe campaign they launched in support of increasing interest rates.
Data will also be released from the labour market this week, and these data will focus on the flexibility of the labour market, which is gradually slowing.

 

The dominance of the dollar

The dollar rose, outperforming more than 31 major currencies. While the dollar was the best performing, the Norwegian krone, Swedish krone,
and New Zealand dollar were the worst performing among the rest of the currencies in European markets.

The decline of the US currency in 2023 comes as a result of Wall Street intensifying its bets on the easing cycle,
but traders have begun to reconsider the monetary path, and central banks have indicated the possibility that the phase of rising interest rates has ended.
However, the banks will not easily give up the fight against inflation.

Helen Giffen, a spot foreign exchange trader at Money USA, said that the markets have not determined their condition for the new year.
The Federal Reserve will not cut interest rates next March. These are the prevailing expectations, and the meeting report will confirm these expectations.

 

 

The Dollar starts 2024 with its best day since March

The dollar price fell to its lowest level since July

The dollar price fell to its lowest level since July: Amid increasing bets on interest cuts and supporting economic reports, the dollar price continued to decline.
The dollar deepened its loss despite the most followed by the Federal Reserve Bank indicator showing a slight rise in prices,
which proves the central bank’s intention to reduce interest rates during the next year.
Paresh Upadhyaya, Director of Fixed Income and Currency Strategies at Amundi Asset Management, said:
“The process of the dollar’s decline has begun, provided that inflation does not rise again.
All data supports the market and its expectations of further lowering interest rates.”

 

Topics
Bloomberg Dollar Spot Index
Dollar volatility
Swiss franc

Bloomberg Dollar Spot Index

 

As for the Bloomberg Dollar Spot Index, it fell by 0.3% on Friday to its lowest level since July, which led to its decline compared to the rest of the central indices.
As for the Swiss franc, it rose to its maximum degree in opposition to the USD since  2015.
At the same time, the euro and the Norwegian krone rose to their highest level since August.

 

Dollar volatility

The dollar rose rapidly in July, before falling in recent weeks, as economic data showed a decline in inflation
and a slowdown in labour markets in the strongest and largest markets in the economy.
The dollar’s decline continued in September after the Federal Reserve made it clear that it expects to reduce interest rates
next year after announcing that the interest rate hike campaign had ended.
According to the one-year risk reversal index, demand for options contracts that benefit from a rise in the dollar has fallen to the lowest level since July,
compared to contracts that gain if the dollar rises, which may indicate an additional decline in the coming year.
Goldman Sachs expects the currency’s value to fall by 3% during the new year.
it is important to note that the Federal Reserve’s caution contradicts the position of monetary policymakers at the European Central Bank,
which warns investors against anticipating and betting on imminent interest rate cuts. The price of the euro against the dollar rose by 3%.

 

Swiss franc

The Swiss franc rose to its highest level since 2015 against the dollar,
when the Swiss Central Bank decided to abandon the policy of containing the rise in the currency,
and the Swiss franc against the euro also reached its highest level in nine years.
The Swiss franc outperforms all currencies of the G10 countries,
due to the belief that the Swiss National Bank’s use and preference for the local currency will prevent the price of the franc from falling.
Patrick Harker, President of the Federal Reserve Bank of Philadelphia, recently said that the US central bank should start cutting interest rates, but not now.
While the market expects the monetary easing process to begin soon, economists expect the Federal Reserve to postpone the interest rate cut until the middle of next year.

 

The dollar price fell to its lowest level since July

Euro rises from three-month low

Euro rises from three-month low as investors await ECB meeting

The euro rose from a three-month low against the dollar on Thursday,
as investors awaited the upcoming European Central Bank meeting.

 

Topic

The Euro

 

 

 

 

 

 

The Euro

The euro rose 0.21% to $1.0752, extending gains from a low of $1.0686 last week, its lowest since mid-June.

Its last rise was to $1.0736, with major moves being restricted by the upcoming ECB meeting.

 

Expectations for the meeting are split between a pause and a 25 basis point rate hike,
with market pricing leaning towards a rate hike.

 

“Looking at market pricing, the euro will fall more if the ECB keeps rates unchanged compared to rising if rates are hiked,” said Christina Clifton, foreign exchange strategy and economics analyst at the Commonwealth Bank of Australia.

 

Clifton added that the ECB will also release an updated set of economic forecasts,
and the ECB’s views on how quickly inflation will fall will guide the market on how much further tightening is likely.

 

Elsewhere, the pound sterling was flat at $1.2486, the Japanese yen rose 0.1% to 147.29 per dollar,
and the Swiss franc held steady at 0.8934 per dollar.

 

The Australian dollar rose 0.54% to its highest level since September 5 at $0.64545 after data showed the economy added 64,900 jobs in August.

 

The Swedish krona briefly touched a new all-time low of 11.967 per euro after data showed the pace of Swedish core inflation slowed more than expected in August.

 

Euro rises from three-month low

Gold and oil declined and an upcoming meeting today on the US-Iranian talks

Gold and oil declined and an upcoming meeting today on the US-Iranian talks

Gold and oil declined and an upcoming meeting today on the US-Iranian talks: Oil resumed its decline today, having managed to rise to a 7-year high, while traders still concerned about the Ukrainian situation and Russian threats. 

Evest follows market developments in the following report.

Topics:

Oil declined in anticipation of US Iran talks

Traders focus on talks in Ukraine

Russia and France negotiations

The Dow Jones index rose alone by one point in a volatile session

Mixed dynamics in Asia

The gold declined again and the dollar surged

Oil declined in anticipation of US Iran talks

The oil price fell slightly on Tuesday after hitting a seven-year high following the results of the previous session.

Market attention turned to talks between Washington and Tehran on Iran’s nuclear program, which will resume on February 8.

Investors’ optimism that the parties will reach an agreement allowing Iran to formally resume oil exports is increasing, Bloomberg reported.

Earlier, the Wall Street Journal reported that President Joe Biden’s administration had lifted a number of sanctions against civilian nuclear projects in Iran,
in an effort to bring Tehran back into compliance with the terms of the Joint Comprehensive Plan of Action on Iran, a program approved in 2015.

The April futures price for Brent oil on London Futures Exchange reached $92.53 per barrel,
$0.16 (0.17%) lower than the closing price of the previous session.

As a result of Monday’s trading, these futures fell by $0.58 (0.6%) to $92.69 per barrel.

The price of oil futures for March in electronic trading on the New York Mercantile Exchange (NYMEX) at this time was $91.24 per barrel,
$0.08 (0.09%) lower than the final value of Monday’s session.

The day before, these futures fell by $0.99 (1.1%) – to $91.32 per barrel.

Traders’ concerns about market supply shortages have declined due to some progress in negotiations between the United States and Iran.

In the meantime, demand expectations remain mixed.

For its part, the state-owned Saudi Aramco said that Saudi Arabia planned to raise the price of all grades of oil to buyers from all regions in March.

Traders focus on talks in Ukraine

The situation throughout Ukraine remains a major concern for traders.

The day before, Biden said after talks with German Chancellor Olaf Schultz that the Nord Stream 2 gas pipeline would not work if Russia invaded Ukraine.

At a press conference in Washington following talks with the United States,
European diplomatic chief Josep Burrell said that the European Union was proceeding from the fact that it was possible,
to find a diplomatic solution to the situation that had developed in the Russian border area with Ukraine. 

“If Russia continues the course of aggression, the actions of the European Union and the United States will be significant,
and this is particularly true of sanctions,” he said.

 

Russia and France negotiations

Russian President Vladimir Putin said at a press conference following negotiations with the French President ,
that the assertion that Russia was acting aggressively ran counter to common sense,
that it was the NATO infrastructure that came close to the borders of the Russian Federation, not the other way around.

Vladimir Putin also said that France and Russia were in solidarity on the need to maintain and fully restore the Joint Comprehensive Plan of Action on Iran’s nuclear program.

Putin drew the attention of French Emmanuel Macron to Kyiv‘s unwillingness to implement the “Minsk agreements”,
the only solution to the situation in south-eastern Ukraine.

He  believes that some of Macron’s ideas could form the basis for joint steps to calm the situation on Ukraine.

Macron promised on Tuesday to discuss Russian proposals on security assurances with Kyiv.

According to Macron, the coming days will be decisive in terms of de-escalation of the situation in Ukraine,
which will depend on negotiations and consultations with the United States, NATO and Europeans,
as well as his meeting with Ukrainian President Volodymyr Zelensky.

According to media agencies, British Prime Minister Johnson is considering deploying British Royal Air Force fighters and RN warships to bring back Ukraine.

For his part, Russian President Putin warned against drawing the European States into military conflict if Ukraine joined NATO.

The Dow Jones index rose alone by one point in a volatile session

US stock indices, the Standard and Poor’s and the Nasdaq, fell by 0.4-0.6%, respectively, and the Dow Jones index rose by only one point after the volatile session on Monday.

This week, markets will focus on US consumer price dynamics data for January, which will be published on Thursday.

Analysts surveyed by Trading Economics predicted that US consumer prices rose by 7.3% on an annual basis last month and 0.5% versus December.

Accelerating inflation and a vibrant labor market recovery can become strong arguments for the Fed in favor of tightening monetary policy.

The corporate reporting season, which is well under way, turned out to be a success overall.

About 75% of companies have reported the S&P index already over the past quarter, and their earnings exceeded market expectations by an average of 8%, according to Credit Suisse.

 

Mixed dynamics in Asia

In Asia, index dynamics were mixed on Tuesday.

Australia’s ASX index rose by 1.1%, Japan’s Nikkei index – by 0.3%,
China’s Shanghai Composite Index fell by 0.9%, South Korea’s KOSPI rose by 0.8%, and Hong Kong’s Hang Seng Index rose. 

The gold declined again and the dollar surged

Both gold and silver moved lower at the beginning of the European session.

In the rest of the commodity complex, copper fell by about 1%.

In foreign exchange markets, the dollar index rose by 0.35% overnight.

The dollar pair against the Japanese yen was the largest driver, jumping by 0.38%.

In cryptocurrency, bitcoin started to recover, also rising by 2.25%.