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