- The US Dollar Index (DXY) drifts lower to 102.45 on Monday.
- The dovish remarks from Federal Reserve (Fed) officials triggered a rally in US equities and weighed on the USD.
- Traders await the US Building Permits and Housing Starts, due on Tuesday.
The US Dollar Index (DXY), a measure of the value of the US Dollar (USD) against a weighted basket of currencies used by US trade partners, loses traction during the early European session on Monday. The DXY bounces off the multi-month lows of 101.77 and currently trades near 102.45, losing 0.15% for the day.
The stronger US Services PMI on Friday lends some support to the Greenback. However, the upside remains limited amid the anticipation of three rate cuts from the Federal Reserve (Fed) next year. Data released on Friday showed that a flash reading of US S&P Global Services PMI rose to 51.3 in December from 50.8 in November, beating the market expectation of 50.8. The Manufacturing PMI dropped to 48.2 in December, compared to 49.4 in November and market expectations of 49.3. Finally, the Composite PMI climbed to 51.0 in December versus 50.7 prior.
The dovish stance from the Fed triggered a rally in US equities and exerted some selling pressure on the Greenback. Money markets now see a nearly 75.0% chance of at least a 25-basis point rate cut in March 2024, up from about 64.5% before the latest policy decision, according to CME Group’s FedWatch tool.
Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said on Sunday that it’s too early to declare victory over the inflation war, and the decisions on rate cuts will depend on upcoming economic data, whereas Atlanta Fed President Raphael Bostic said the central bank can begin cutting the interest rate in the third quarter of 2024 if inflation falls as expected.
The possible Fed rate cuts next year also weigh on US Treasury bond yields. The US 10-year Treasury note yields reached multi-month lows and stand near 3.90% as the Fed indicated that it would cut interest rates three times in 2024 after its latest meeting.
Traders will keep an eye on the US Building Permits and Housing Starts, due on Tuesday. Later this week, the US Consumer Confidence and Existing Home Sales will be released on Wednesday. The US Gross Domestic Product (GDP) Annualized (Q3) will be due on Wednesday, which is expected to remain steady at 5.2%. The Core Personal Consumption Expenditures Price Index (Core PCE) on Friday will be in the spotlight.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.