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.
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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