Dollar Tumbled Last Week Amidst Powell's Rate Cut Assurances
11 Março 2024 - 8:18AM
RTTF2
The Fed's growing confidence that inflation was moving
sustainably at the 2 percent level and Jerome Powell's ample rate
cut hints in the Congressional testimony sent the Dollar plunging
in the last week. The U.S. Dollar plunged against the euro, the
British Pound, the Australian Dollar as well as the Japanese Yen
during the week ended March 8, 2024. The Dollar Index also recorded
heavy losses.
The Dollar Index, a measure of the Dollar's strength against a
basket of 6 currencies dropped 1.1 percent during the week ended
March 8, 2024. From the level of 103.86 recorded at close on March
1, the index descended steadily, to close at 102.71. The Index
recorded the week's high of 103.96 on Monday and the week's low of
102.36 on Friday.
Data released on Tuesday showed a slightly slower growth in the
services sector. The ISM Services PMI dropped to 52.6 in February,
from a four-month high of 53.4 in January and below forecasts of
53. Despite expectations that the Fed Chair would in his
Congressional testimony reiterate patience before embarking on rate
cuts, Jerome Powell reinforced expectations that rate cuts were
indeed coming later in the year. His concerns about the dangers of
delaying rate cuts, also exacerbated the greenback's decline.
The monthly jobs data released from the U.S. on Friday showed
the unemployment rate rising to 3.9 percent, from 3.7 percent,
touching the highest level since January 2022. However, the
additions to non-farm payrolls in February was 275 thousand,
surpassing market expectations of an addition of 200 thousand. The
mixed job market update added to uncertainty about the Fed's
potential rate action and capped the Dollar's losses.
The dollar's weakness lifted the EUR/USD pair to a high of
1.0982 on Friday from the week's low of 1.0838 recorded on Monday.
Better-than-expected trade data from Germany also boosted sentiment
for the Euro. The pair added 0.92 percent during the week, closing
at 1.0937 on Friday, versus 1.0837 a week earlier. The European
Central Bank had on Thursday held rates steady as well as
simultaneously acknowledged the faster-than-expected easing in
inflation, limiting gains for the pair. The GBP/USD pair jumped 1.6
percent during the week ended March 8, lifting the sterling to
$1.2857, from $1.2650 a week earlier. The pair climbed from the low
of 1.2650 touched on Monday to the high of 1.2895 recorded on
Friday amidst no major surprises in the Spring Budget
announcements. Market perception that Bank of England would be slow
in cutting interest rates also supported the sterling.
The Australian Dollar too jumped 1.59 percent against the U.S.
Dollar during the week ended March 8. The pair jumped from the low
of 0.6477 recorded on Tuesday to 0.6669 on Friday, but eventually
closed at 0.6627. The pair was at 0.6526 a week earlier. The
Australian economy recording the ninth straight period of growth in
the fourth quarter of 2023 and higher-than-expected trade surplus
update from trading partner China helped lift the AUD/USD pair.
The USD/JPY pair slipped more than 2 percent during the past
week amidst the dollar's weakness and speculation that the Bank of
Japan could soon end the negative interest rates regime. The pair
dropped to 147.07, from 150.11 a week earlier. The weekly trading
range was a bit wider, between a high of 150.65 recorded on Monday
and 146.48 recorded on Friday.
Amidst renewed rate cut optimism post the Fed Chair's
Congressional testimony, the CME FedWatch tool on Friday showed
rate cut expectations at 24 percent for the FOMC review in May and
at 73 percent for the Fed review in June. Despite markets
increasing the expectations of a rate cut by the Fed, all eyes are
on the U.S. CPI readings for February due on Tuesday. The headline
annual inflation is seen steady whereas its core component is seen
declining.
The headline month-on-month reading is seen edging up whereas
its core component is seen edging lower. Amidst the expectations,
The Dollar Index is currently hovering near 102.88. The EUR/USD
pair has decreased to 1.0920. Ahead of the release of the national
unemployment data, the GBP/USD pair has also decreased to 1.2820.
The AUD/USD pair is at 0.6602 whereas the USD/JPY pair has edged
down to 147.05.
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